ETFs
Tech ETFs Rise Ahead of NVIDIA Earnings – May 22, 2024
All three major indexes hit record highs ahead of NVIDIA’s earnings, which are expected to bring huge optimism to the stock market. The AI chipmaker will likely beat expectations on both fronts and is expected to raise its guidance for the next quarter (read:Should you play NVIDIA earnings with bullish ETFs?).
Given this, investors have turned their attention to the technology sector, with many ETFs hitting new 52-week highs this past trading session. These include Roundhill Magnificent Seven ETF (MAGS – Free report) , MicroSectors FANG+ ETN (FNGS – Free report) , Selected Technology Sector SPDR Funds (XLK – Free report) , Vanguard Information Technology ETF (VGT – Free report) And First Trust Expanded Technology ETF (XPND – Free report) .
Strong Growth Prospects in Tech Space
The popularity of artificial intelligence (AI) will continue to fuel the sector’s recovery, with companies investing heavily in the technology. The expansion of AI applications promises to unlock new growth opportunities within the sector. The global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030, according to a new report from Grand View Research.
The sector is well placed to benefit from expected rate cuts this year. Inflation in the United States slowed for the first time in six months, sparking new bets on a Fed rate cut as soon as September. 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 (read: 3 sector ETFs will play on renewed hopes of Fed rate reduction).
The global digital shift has accelerated e-commerce in everything from remote working to entertainment and shopping, reinforcing the strength of the sector. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel this rally.
Additionally, 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.
Focus on ETFs
Roundhill Magnificent Seven ETF (MAGS – Free report)
The Roundhill Magnificent Seven ETF is the first-ever ETF that provides investors with equal-weighted exposure to “Magnificent Seven” stocks. It has amassed $300.6 million in assets and charges 29 basis points in fees annually. MAGS trades an average daily volume of 200,000 shares (read: ETFs to tap as investors become most bullish since November 2021).
MicroSectors FANG+ ETN (FNGS – Free report)
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is equal dollar weighted and designed to provide exposure to a group of highly traded growth stocks of technology and next-generation technology companies. The note represents a 10% share in each of the shares. MicroSectors FANG+ ETN has accumulated $269.8 million in its asset base and charges 58 basis points in annual fees. It trades with an average daily volume of 133,000 shares and has a Zacks ETF Rank #3 (Hold) (read: Tesla’s recovery is planned? Bet on these ETFs).
Selected Technology Sector SPDR Funds (XLK – Free report)
The Technology Select Sector SPDR fund targets the broad technology sector and tracks the Technology Select Sector Index. It holds approximately 65 stocks in its basket, with key holdings in software, semiconductors and semiconductor equipment, as well as technology hardware, storage and peripherals. The Technology Select Sector SPDR Fund is the most popular and widely traded ETF, with $65.7 billion in assets under management and an average daily volume of 6.1 million shares. The fund charges 9 basis points in fees per year and has a Zacks ETF Rank #1 (Strong Buy).
Vanguard Information Technology ETF (VGT – Free report)
Vanguard Information Technology ETF manages $67.5 billion in its asset base and provides exposure to 313 technology stocks. It tracks the MSCI US Investable Market Information Technology 25/50 index. Semiconductors, system software, hardware storage and technology peripherals, and application software are the four major sectors. The Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 397,000 shares. It has a Zacks ETF Rank #1.
First Trust Expanded Technology ETF (XPND – Free report)
The First Trust Expanded Technology ETF is an actively managed ETF providing broad exposure to information technology or financial companies and communications services companies whose businesses are primarily derived from and/or dependent on technology (these companies are collectively referred to herein as “Broader Technology Companies”). ). It holds 50 basis points of fees per year and charges 65 basis points of annual fees. The First Trust Expanded Technology ETF has managed assets worth $18.6 million in its asset base and trades a daily volume of 3,000 shares on average.
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