The technology sector is back on track and has once again dominated the stock market rally since early November. Behind the new confidence is hope that the Fed’s aggressive interest rate hike campaign may be nearing an end. Additionally, a surge in large-scale tech investments by hedge funds also gained strength.
This rally has pushed many ETFs to new one-year highs. This year, we have once again featured five companies that are leading the way in this field.these are VanEck Vector Semiconductor ETF SMH, SPDR NYSE Technology ETF XNTK, iShares US Technology ETF IYW, Pacer Data and Digital Revolution ETF TRFK and iShares Extended Tech Sector ETF IGM. Each of these funds has a Zacks ETF Rank #1 (Strong Buy) or #2 (Buy), suggesting continued outperformance.
Easing concerns about interest rate hikes
Taken together, the latest data strengthens the view that the Fed is done raising interest rates. Job growth slowed in October and the unemployment rate rose as last month’s auto strike weighed on the labor market. Inflation generally slowed in October. So-called core inflation, which excludes volatile factors such as food and energy prices, rose 4% year over year, the slowest annual pace since September 2021, according to the latest data from the Bureau of Labor Statistics. 5 ETFs Set Gains as Inflation Cools).
Meanwhile, retail sales also fell in October for the first time in seven months, further increasing expectations that the Fed will finish raising interest rates.
The probability of a rate hike at the Fed’s December meeting has fallen from 14% to 0%, according to the CME FedWatch tool. The tech sector relies on borrowing to get good growth, so when interest rates are low, it’s cheaper to borrow more money for your initiatives.
A surge in investment
Multiple hedge funds have expanded their bets on big technology stocks including Amazon AMZN, Microsoft MSFT and Metaplatform META, according to new regulatory filings. This shift came despite these companies experiencing some stumbles in the third quarter of this year.
Tiger Global Management increased its investment in Nvidia NVDA by 77% and Alphabet GOOGL by 40%. Furthermore, we increased our stake in Meta by 4%, Microsoft by 8%, and Amazon by 6.5%. Bill Ackman’s Pershing Square Capital Management nearly doubles its stake in Alphabet Inc.’s Class A stock, and Daniel Loeb’s Third Point creates a new position in Meta, buying 1.1 million shares. Obtained. Coatue Management increased his meta position by 9%. Both Light Street Capital and Rattan Capital Management have significantly increased their holdings in Amazon, with Light Street increasing their positions by 5% and Rattan by 72%.
Solid sector fundamentals
The expansion of artificial intelligence (AI) applications has the potential to bring new growth opportunities to this field. The global digital shift has accelerated e-commerce in everything from remote work to entertainment and shopping, reinforcing the sector’s strengths. Rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communications, blockchain, and 5G technologies will continue to accelerate the rise (Read: Frontiers 5 Sector ETFs Last week’s market rally).
Tech giants have strong balance sheets, durable revenue streams, and solid profit margins, making them attractive investments. These companies are well-positioned to withstand a possible downturn and have demonstrated improved cost discipline. Additionally, the Technology sector ranks in the top 38% of stocks in the Zacks Sector Rank, suggesting it will continue to outperform in the coming months.
Let’s take a closer look at the ETFs mentioned above.
VanEck Vectors Semiconductor ETF (SMH) – up 58.8%
The VanEck Vectors Semiconductor ETF provides exposure to companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor manufacturing and equipment. VanEck Vectors Semiconductor ETF has 26 stocks in its basket.
The VanEck Vectors Semiconductor ETF has $10.8 billion worth of assets under management and charges annual fees and expenses of 35 bps. SMH is a heavily traded stock with a daily trading volume of 8.8 million shares (Read: Inside the Recent Semiconductor ETF Rise).
SPDR NYSE Technology ETF (XNTK) – up 55.7%
The SPDR NYSE Technology ETF provides exposure to 35 of the largest publicly traded U.S. technology companies by tracking the NYSE Technology Index. Semiconductors account for the largest share at 26.1%, with systems software, application software, interactive media and services, and Broadline Retail rounding out the next four spots.
The SPDR NYSE Technology ETF has accumulated $570.1 million and has an annual fee of 35 bps. Average daily trading volume is 11,000 shares.
iShares US Technology ETF (IYW) – up 55.2%
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. Provides exposure. 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 $12.6 billion in assets under management and charges 40 bps in fees and expenses. Volume is good, with 732,000 shares traded per day.
Pacer Data and Digital Revolution ETF (TRFK) – up 50.3%
The Pacer Data and Digital Revolution ETF is designed to provide investors with exposure to globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, which has 80 stocks in its basket (Read: 5 of his ETFs targeting Nvidia’s historic surge).
The Pacer Data and Digital Revolution ETF has accumulated $5.2 million in assets. The expense ratio is 0.60%. TRFK’s trading volume is small, averaging around 1,000 shares per day.
iShares Expanded Tech Sector ETF (IGM)
The iShares Expanded Technology Sector ETF provides broad exposure to the technology sector and technology-related companies in the communications services and consumer discretionary sectors. It tracks the S&P North America Expanded Technology Sector Index and has a basket of 277 stocks. By sector, semiconductors, interactive media and services, and systems software each account for double-digit exposure.
The iShares Expanded Technology Sector ETF has $3.4 billion in assets under management and an annual fee of 41 bps. There is a moderate amount of trading at an average of about 28,000 shares per day.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Report
iShares US Technology ETF (IYW): ETF Research Report
iShares Expanded Tech Sector ETF (IGM): ETF Research Report
SPDR NYSE Technology ETF (XNTK): ETF Research Report
Meta Platforms, Inc. (META): Free stock price analysis report
Pacer Data and Digital Revolution ETF (TRFK): ETF Research Report
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