With the ever-evolving and expanding technology industry, tech ETFs are currently offering impressive investment opportunities by capturing the sector’s growth and offering diversification, lowering risk, and allowing exposure to multiple tech companies for growth under a single ticker.
Therefore, investors might consider strong tech ETFs, such as Invesco QQQ Trust (QQQ), Vanguard Information Technology Index Fund ETF Shares (VGT), and The Technology Select Sector SPDR Fund (XLK) for broad sector exposure.
The technology industry is currently thriving with numerous innovative breakthroughs transforming different segments, be it healthcare, finance, industrial, or biotech. The rising demand from customers is further contributing to continuous innovations and new advancements. Amid this, tech ETFs grant investors the opportunity to have broad exposure to numerous powerhouse tech firms.
New technologies are not just advancing traditional methods and means, but they are transforming operations, changing the way societies operate, and leading to more efficient and sustainable practices. Some of the trends that will shape the tech industry in the coming time include Artificial Intelligence (AI), Machine Learning (ML), robotics process automation, 5G, and edge computing.
Also, amid the rising adoption of AI, Statista forecasts the global Artificial Intelligence (AI) market to reach around $184 billion in 2024, with the U.S. leading the worldwide market at $50.16 billion. Also, the market is expected to grow at a CAGR of 28.5%, resulting in a market volume of $826.70 billion by 2030.
Given this favorable backdrop, let’s analyze the prospects of some of the tech ETFs in detail.
Invesco QQQ Trust (QQQ)
QQQ in an ETF which offers exposure to one of the world’s widely-followed equity benchmarks, the NASDAQ, and is one of the most established and actively traded exchange-traded products in the world. The fund has a huge tech exposure due to its rules of only investing in non-financial stocks listed on NASDAQ. It tracks the NASDAQ-100 (INDEXNASDAQ IXIC) Index.
With $313.80 billion in AUM, QQQ’s top holdings are Apple Inc. (AAPL) with an 8.76% weighting, NVIDIA Corporation (NVDA) at 8.23%, and Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN) at 7.64% and 5.30%, respectively.
The fund has a total of 102 holdings, with its top 10 assets comprising 51.03% of its AUM. It has an expense ratio of 0.20%, lower than the category average of 0.36%. QQQ fund inflows were $13.54 billion over the past six months and $24.48 billion over the past year.
QQQ pays an annual dividend of $2.82, which translates to a 0.55% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 16.9% over the past 3 years and 12.8% over the past 5 years. QQQ has paid dividends for 16 consecutive years.
QQQ has gained 13.7% over the past six months and 33.4% over the past year to close the last trading session at $515.29. It has a beta of 1.11. The fund’s NAV was $515.38 as of December 2, 2024.
QQQ’s POWR Ratings reflect its solid prospects. The fund has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
QQQ has an A grade for Trade and Buy & Hold. Within the A-rated Large Cap Growth ETFs group, QQQ has topped among the 61 ETFs.
To access all QQQ’s POWR Ratings, click here.
Vanguard Information Technology Index Fund ETF Shares (VGT)
VGT is launched and managed by The Vanguard Group, Inc. It tracks a market cap-weighted index of companies in the US information technology sector, mainly targeting software, consulting, and hardware. It seeks to track the performance of the MSCI US Investable Market Index (IMI) 25/50 Information Technology index.
The fund has an AUM of $82.62 billion. Its top holdings include AAPL with a 15.76% weighting, followed by NVDA at a 15.40% weight, and MSFT and Broadcom Inc. (AVGO) at 13.34% and 4.55%, respectively. VGT has a total of 316 holdings, with the top 10 assets comprising 58.49% of its AUM.
The ETF has an expense ratio of 0.10%, compared to the category average of 0.59%. Over the past six months, VGT’s fund inflows totaled $4.10 billion, and $6.89 billion over the past year.
VGT has paid dividends for 18 consecutive years. The ETF pays a $3.73 per share dividend annually, which translates to a 0.60% yield on the current price. Its dividend payments have grown at a CAGR of 10.2% over the past three years and 8.1% over the past five years.
VGT has gained 11.7% over the past six months and 33.5% over the past year to close the last trading session at $574.52. Also, it has a beta of 1.16. The fund has a NAV of $628.46 as of December 2, 2024.
VGT’s POWR Ratings reflect its sound fundamentals. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. Within the Technology Equities ETFs group, VGT has topped among the 119 ETFs.
Click here to see all the VGT ratings.
The Technology Select Sector SPDR Fund (XLK)
XLK was launched by State Street Global Advisors, Inc. and is managed by SSGA Funds Management, Inc. The fund invests in companies within the information technology sectors. The fund seeks to track the performance of the Technology Select Sector Index using a full replication technique to closely mirror the index’s composition and performance.
With assets under management of $72.10 billion. XLK’s top holdings include AAPL with a 14.78% weighting, followed by NVDA at 13.78%, MSFT at 13.01%, and AVGO at 4.06%.
The ETF has a total of 142 holdings, with its top 10 assets comprising 98.24% of its AUM. Its expense ratio is 0.09%, lower than the category average of 0.59%. Over the past six months, its fund inflows were $105.36 million, and $2.62 billion over the past year.
XLK’s annual dividend of $1.56 translates to a 0.67% yield at the current price level. The fund’s dividend payouts have increased at 12.2% CAGR over the past three years. Also, XLK has paid dividends for 15 consecutive years.
XLK has soared 12% over the past six months and 28.7% over the past year to close the last trading session at $235.95. It has a beta of 1.14. The fund’s NAV was $235.96 as of December 2, 2024.
XLK’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
XLK has an A grade for Buy & Hold and Trade. The fund is ranked #2 in the list of 119 ETFs in the Technology Equities ETFs group.
To access all the POWR Ratings for XLK, click here.
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QQQ shares were trading at $514.88 per share on Tuesday morning, down $0.41 (-0.08%). Year-to-date, QQQ has gained 26.27%, versus a 28.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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