ETFs
Here’s Why Tech ETFs Will Continue Their Uptrend
Wall Street experienced a remarkable rally, supported by a rise in technology stocks. The craze for artificial intelligence (AI), hopes for rate cuts and the growing share of the “Magnificent Seven” have boosted the space. Notably, the technology sector is so far the clear leader in the market recovery in 2024.
While many ETFs have propelled the sector so far this year, we’ve highlighted five, from different sectors, that are leading the way. These are VanEck Vectors Semiconductor ETF SMH, First Trust SkyBridge ETF for the Crypto Industry and Digital Economy CRPT, AXS Esoterica NextG Economy ETF WUGI, Clockwise Core and Innovation Stock ETF Time and ProShares Nanotechnology ETF TINY.
Strong sectoral growth trends
The boom in artificial intelligence (AI) will continue to fuel the sector’s recovery, with companies investing huge sums in the technology. The expansion of AI applications promises to unlock new growth opportunities within the sector. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030 (read: Smart ETFs are focused on next-generation AI product launches).
The Fed, at its last meeting, forecast one rate cut this year and plans four cuts in 2025. The central bank changed the language of its statement, noting that there has been “further modest progress toward committee’s 2% inflation target.” » Previously, the press release had highlighted a “lack” of further progress. This heralds a period of higher interest rates for a while. Tech titans have shown strong resilience in the face of such a scenario. And when the Fed begins cutting rates later this year, tech stocks will get a boost. Since the technology sector relies on borrowing to achieve higher growth, it is cheaper to borrow more money for new initiatives when interest rates are low.
The Magnificent Seven are the biggest growth engine in the technology sector and the S&P 500 as a whole. It now represents 31% of the weight of the S&P 500. NVIDIA (NVDA) recently surpassed $3 trillion in market capitalization and became one of the most valuable companies in the United States. The stock has climbed 132.2% so far this year, while Meta Platforms (META) and Alphabet (GOOGL) are up 34.9% and 24%, respectively. Apple (AAPL) reclaimed the title of most valuable company this week with a market cap of $3.3 trillion, edging out Microsoft’s (MSFT) market cap of $3.2 trillion (read: Apple jumps into the AI train: ETF to buy).
Additionally, cutting-edge technologies including cloud computing, big data, Internet of Things, wearable devices, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology, will continue to drive the sector. At the same time, global IT spending is expected to increase 8% year-over-year to $5.06 trillion this year, according to Gartner’s latest forecast. This will allow global IT spending to surpass $8 trillion well before the end of the decade. Higher spending on software, data center systems, IT services and semiconductors will provide further impetus to the sector.
Additionally, tech titans have strong balance sheets, sustainable revenue streams and robust profit margins, making them attractive investments. They are better positioned to withstand a potential economic downturn and have demonstrated better cost discipline.
The story continues
ETF to buy
VanEck Vectors Semiconductor ETF (SMH) – Up 52.8%
The VanEck Vectors Semiconductor ETF provides exposure to companies involved in semiconductor production and equipment. SMH tracks the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. The VanEck Vectors Semiconductor ETF holds 26 stocks in its basket (read: 5 large-cap ETFs leading this year’s market rally).
VanEck Vectors Semiconductor ETF has managed assets worth $22.2 billion and charges 35 basis points in annual fees and expenses. SMH is heavily traded with volume of 7 million shares per day and has a Zacks ETF Rank #1 (Strong Buy), with a High Risk Outlook.
First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT) – Up 45.5%
The First Trust SkyBridge Crypto Industry and Digital Economy ETF is designed to provide exposure to companies that SkyBridge believes are driving innovation related to cryptocurrency, crypto assets and the digital economy. SkyBridge identifies stocks primarily through a “bottom-up” search focused on finding leading companies in the crypto industry ecosystem.
The First Trust SkyBridge Crypto Industry & Digital Economy ETF holds 30 stocks in its basket and charges investors 85 basis points in fees per year. It has amassed $60.6 million in assets and trades an average daily volume of 59,000 shares.
AXS Esoterica NextG Economy ETF (WUGI) – Up 35.5%
AXS Esoterica NextG Economy ETF is an actively managed ETF that invests in stocks of companies that benefit from the evolving digital economy. He holds 31 stocks in the basket.
The AXS Esoterica NextG Economy ETF has accumulated $30.4 million in its asset base and charges 75 basis points in fees per year. He trades an average of 4,000 shares per day.
Clockwise Core Equity & Innovation ETF (TIME) – Up 28.9%
Clockwise Core Equity & Innovation ETF is a cutting-edge fund designed for investors seeking exposure to long-term core growth opportunities, balanced by emerging technologies that shape the future. He holds 34 stocks in his basket, each representing no more than 9% of assets.
The Clockwise Core Equity & Innovation ETF has amassed $22.6 billion in its asset base and charges investors 95 basis points in fees annually. It trades an average daily volume of 6,000 shares.
ProShares Nanotechnology ETF (TINY) – Up 27.6%
The ProShares Nanotechnology ETF invests in companies that help businesses use nanoscale technology to transform lives and revolutionize industries. It tracks the Solactive Nanotechnology index and holds 30 stocks in its basket, none representing more than 5.8% of the shares.
The ProShares Nanotechnology ETF has accumulated $6.5 million in its asset base and trades an average daily volume of 2,000 shares. It charges 58 basis points in fees per year to investors.
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ProShares Nanotechnology ETF (TINY): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
Clockwise Core Equity & Innovation ETF (TIME): ETF Research Reports
AXS Esoterica NextG Economy ETF (WUGI): ETF Research Reports
First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT): ETF Research Reports