The personal computer (PC) market showed a gradual recovery in the fourth quarter of 2023 after a prolonged downturn. Worldwide shipments increased 0.3% year-on-year to 63.3 million units in the fourth quarter, marking the first annual growth in eight consecutive quarters. According to Gartner, this trend is on the decline.
Most analysts expect the strong trend to continue into 2024, given the innovations coming from PC’s on-device AI capabilities. A resurgence in PC demand will not only benefit PC makers, but also chip makers, memory makers and other component suppliers. Therefore, investors should seize the opportunity with technology ETFs. Technology ETFs have consistently garnered a Zacks Rank #1 (Strong Buy) or #2 (Buy), suggesting continued outperformance (see: See All Technology ETFs here).
These include: Technology Select Sector SPDR Fund XLK, Vanguard Information Technology ETF VGT, iShares US Technology ETF IYW, MSCI Information Technology Index ETF FTEC and First Trust Technology AlphaDEX Fund FXL.
Acer led the way with 11.1% year-over-year growth. Apple AAPL also recorded strong growth at 7.2%, followed by HP HPQ at 5.6% and Lenovo at 3.2%. HP maintained its top position in the US PC market, gaining his 27.7% market share. Dell followed with his 22.6% of US market share.
The recovery was driven by the balance between supply and demand. The inventory problem that had plagued the industry for two years was resolved in the fourth quarter. Gartner predicts that the PC market will return to annual growth in 2024 due to artificial intelligence (AI)-enabled PCs and a recovery in demand.
The concept of AI PC, defined as a computer equipped with a neural processor or one that can efficiently run AI programs, represents the next growth opportunity for the PC market. PC manufacturers and chip makers like Microsoft MSFT and Nvidia NVDA are at the forefront of this development. Meanwhile, laptops and desktops purchased at the beginning of the 2020 pandemic are aging, leading to new demand (see: Microsoft and Apple’s Tug of War: ETFs to Watch).
Despite recent gains, the industry experienced a significant decline in 2023. Total shipments for the year reflected a 14.8% decrease over the previous year, at 241.8 million PCs. This is the first time since 2006 that shipments have fallen below 250 million units.
Canalys revealed that its PC shipments increased 3% year over year to 65.3 million units in the fourth quarter. Notebook shipments increased 4% year-on-year to 51.6 million units, while desktop shipments decreased 1% to 13.7 million units. Overall, PC shipments decreased by 13% year-on-year to 247 million units in 2023.
Technology Select Sector SPDR Fund (XLK)
The Technology Select Sector SPDR Fund covers a broad range of technology sectors and is compliant with the Technology Select Sector Index. The company has approximately 64 securities in its basket, with major holdings in software, semiconductors and semiconductor equipment, technology hardware, storage and peripherals. The Technology Select Sector SPDR Fund is the most popular and frequently traded ETF, with $57.1 billion in assets under management and average daily volume of 6.8 million shares. The fund charges 10 basis points per year in fees and has a #1 Zacks ETF Rank (read 5 Sector ETFs to bet on ahead of Q4 earnings).
Vanguard Information Technology ETF (VGT)
With $58 billion in assets under management, the Vanguard Information Technology ETF provides exposure to 315 technology stocks. I’m currently tracking the MSCI US Investable Market Information Technology 25/50 Index. The top four sectors are system software, technology hardware storage and peripherals, semiconductors, and application software. Vanguard Information Technology ETF’s expense ratio is 0.10%, but trading volume is strong at approximately 471,000 shares. It is ranked #1 on the Zacks ETF.
iShares US Technology ETF (IYW)
The iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 133 U.S. electronics, computer software and hardware, and information technology companies. We provide Ja. Software and services, semiconductors and semiconductor equipment, high-tech hardware and equipment, and media and entertainment are the top four sectors with double-digit exposure each. The iShares Dow Jones US Technology ETF has $14 billion in assets under management and charges 40 bps in fees and expenses. Volume is good, with 658,000 shares traded per day. IYW has a #1 Zacks ETF Rank (Read: 5 Tech ETFs That Shattered the Magnificent Seven ETF in 2023).
MSCI Information Technology Index ETF (FTEC)
The MSCI Information Technology Index ETF includes 303 technology stocks and has $8.1 billion in assets under management. It follows the MSCI USA IMI Information Technology Index and has leading stocks in Software, Technology Hardware Storage and Peripherals, Semiconductors and Semiconductor Equipment. The MSCI IT Index ETF has an expense ratio of 0.08%, but volume is strong at 227,000 shares per day. It is ranked #1 on the Zacks ETF.
First Trust Technology AlphaDEX Fund (FXL)
With $1.3 billion in assets under management, the First Trust Technology AlphaDEX Fund uses the AlphaDEX stock selection methodology to provide exposure to a broad range of technology sectors. Following the StrataQuant Technology Index, the basket includes 97 securities, with software and computer science accounting for a 73.8% share, and the rest going to technology hardware and equipment. First Trust Technology AlphaDEX Fund has a good average trading volume of 53,000 shares per day and charges 62 bps per year in fees. It is ranked #1 on the Zacks ETF.
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Apple Inc. (AAPL): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
HP Inc. (HPQ): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free stock analysis report
Technology Select Sector SPDR ETF (XLK): ETF Research Report
First Trust Technology AlphaDEX ETF (FXL): ETF Research Report
Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Report
iShares US Technology ETF (IYW): ETF Research Report
Vanguard Information Technology ETF (VGT): ETF Research Report
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