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U.S. tech stocks have been hitting rough weather as surging inflation is weighing on their lofty valuations caused by massive policy easing since the start of COVID-19 outbreak.Though tech stocks tried to recoup losses several times in the recent sell-offs, investors remain cautious about betting big on growth stocks. Hence, shares of high-growth technology companies remain in a tight spot.
Due to sky-high inflation, the Fed is hiking rates faster and by a huge margin. This rising rate worries dampened the appeal of the stocks that rely on easy borrowing for superior growth. Technology falls in this category.
Now the question is, if investors should buy the dip in blue-chip tech stocks and ETFs. There are a few more reasons that may support the space despite the rising rate fears.
Tech is New Normal
“New normal” trends like work-and-learn-from-home and online shopping, increasing digital payments and the growing video-streaming scenario are sure to stay for long. The growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are the other winning areas.
Big Tech Resistant to Inflation?
Cramer explained that big tech names like Google parent Alphabet (GOOGL) and Microsoft’s (MSFT) business models are not that responsive to changes in inflation, including the rise in prices for raw materials, chemicals and commodities like gas, plastics, packaging and so on. Higher transportation charges are also less likely to hamper the operations of big tech companies. 5G could bring a boom time for Apple as many will upgrade their phones while carriers expand their coverage of the new faster networks.
Against this backdrop, we highlight a few blue-chip tech ETFs that contain big-shot tech stocks.
The underlying Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics.
XLK contains names like Apple, Microsoft, Nvidia, Visa, Mastercard, etc.
The Vanguard Information Technology ETF seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. VGT holds stocks like Apple, Microsoft, Nvidia, Visa, Mastercard, Broadcom, Cisco, etc.
The S&P 500 Equal Weight Information Technology Index equally weighs stocks in the information technology sector of the S&P 500 Index. RYT holds stocks like Enphase Energy, EPAM Systems, Arista Networks, Paycom Software and Gartner.
Fidelity MSCI Information Technology Index ETF (FTEC - Free Report) – Zacks Rank #1
The underlying MSCI USA IMI Information Technology Index represents the performance of the information technology sector in the U.S. equity market. FTEC holds stocks like Apple, Microsoft, Nvidia, Visa and Mastercard.
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Time to Buy Tech ETFs on the Dip?
U.S. tech stocks have been hitting rough weather as surging inflation is weighing on their lofty valuations caused by massive policy easing since the start of COVID-19 outbreak.Though tech stocks tried to recoup losses several times in the recent sell-offs, investors remain cautious about betting big on growth stocks. Hence, shares of high-growth technology companies remain in a tight spot.
Due to sky-high inflation, the Fed is hiking rates faster and by a huge margin. This rising rate worries dampened the appeal of the stocks that rely on easy borrowing for superior growth. Technology falls in this category.
Now the question is, if investors should buy the dip in blue-chip tech stocks and ETFs. There are a few more reasons that may support the space despite the rising rate fears.
Tech is New Normal
“New normal” trends like work-and-learn-from-home and online shopping, increasing digital payments and the growing video-streaming scenario are sure to stay for long. The growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are the other winning areas.
Big Tech Resistant to Inflation?
Cramer explained that big tech names like Google parent Alphabet (GOOGL) and Microsoft’s (MSFT) business models are not that responsive to changes in inflation, including the rise in prices for raw materials, chemicals and commodities like gas, plastics, packaging and so on. Higher transportation charges are also less likely to hamper the operations of big tech companies. 5G could bring a boom time for Apple as many will upgrade their phones while carriers expand their coverage of the new faster networks.
Against this backdrop, we highlight a few blue-chip tech ETFs that contain big-shot tech stocks.
Technology Select Sector SPDR ETF (XLK - Free Report) — Zacks Rank #1 (Strong Buy)
The underlying Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics.
XLK contains names like Apple, Microsoft, Nvidia, Visa, Mastercard, etc.
Vanguard Information Technology ETF (VGT - Free Report) — Zacks Rank #1
The Vanguard Information Technology ETF seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. VGT holds stocks like Apple, Microsoft, Nvidia, Visa, Mastercard, Broadcom, Cisco, etc.
Invesco S&P 500 Equal Weight Technology ETF — Zacks Rank #1
The S&P 500 Equal Weight Information Technology Index equally weighs stocks in the information technology sector of the S&P 500 Index. RYT holds stocks like Enphase Energy, EPAM Systems, Arista Networks, Paycom Software and Gartner.
Fidelity MSCI Information Technology Index ETF (FTEC - Free Report) – Zacks Rank #1
The underlying MSCI USA IMI Information Technology Index represents the performance of the information technology sector in the U.S. equity market. FTEC holds stocks like Apple, Microsoft, Nvidia, Visa and Mastercard.