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The three major indices touched record highs ahead of NVIDIA’s earnings, which are expected to bring huge optimism into the stock market. The AI chip maker 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 focus on the technology sector, with many ETFs hitting new 52-week highs in the latest trading session. These include Roundhill Magnificent Seven ETF (MAGS - Free Report) , MicroSectors FANG+ ETN (FNGS - Free Report) , Technology Select Sector SPDR Fund (XLK - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and First Trust Expanded Technology ETF (XPND - Free Report) .
Solid Growth Prospects of the Tech Space
The artificial intelligence (AI) craze will continue to fuel the rally in the sector with companies investing big on this technology. The expansion of AI applications holds the promise of ushering in fresh opportunities for growth 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.
The sector is well poised to benefit from the rate cuts expected this year. Inflation in the United States cooled down for the first time in six months, sparking new bets on Fed rate cuts as soon as September. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low (read: 3 Sector ETFs to Play on Renewed Fed Rate Cut Hopes).
The global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping, thereby bolstering strength in the sector. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.
Further, worldwide IT spending is expected to increase 8% year over year to $5.06 trillion this year, according to the latest forecast by Gartner. This will put worldwide IT spending on track to surpass $8 trillion well before the end of the decade. Higher spending across software, data center systems, IT services and semiconductors will provide a further boost to the sector.
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $300.6 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: ETFs to Tap as Investors Turn Most Bullish Since November 2021).
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 next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the stocks. MicroSectors FANG+ ETN has accumulated $269.8 million in its asset base and charges 58 bps in annual fees. It trades in average daily volume of 133,000 shares and has a Zacks ETF Rank #3 (Hold) (read: Tesla Turnaround in the Cards? Bet on These ETFs).
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 65 securities in its basket, with key holdings in software, semiconductors and semiconductor equipment, and technology hardware, storage and peripherals. Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with an AUM of $65.7 billion and an average daily volume of 6.1 million shares. The fund charges 9 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy).
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, systems software, technology hardware storage & peripheral, and application software are the top four sectors. Vanguard Information Technology ETF has an expense ratio of 0.10%, whereas volume is solid at nearly 397,000 shares. It has a Zacks ETF Rank #1.
First Trust Expanded Technology ETF is an actively managed ETF offering broad exposure to information technology companies or financial companies and communication services companies whose operations are principally derived from and/or dependent upon technology (such companies are collectively referred to herein as "Expanded Technology Companies"). It holds 50 bps in fees per year and charges 65 bps in annual fees. First Trust Expanded Technology ETF has managed assets worth $18.6 million in its asset base and trades in a daily volume of 3,000 shares on average.
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Tech ETFs on a Roll Ahead of NVIDIA Earnings
The three major indices touched record highs ahead of NVIDIA’s earnings, which are expected to bring huge optimism into the stock market. The AI chip maker 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 focus on the technology sector, with many ETFs hitting new 52-week highs in the latest trading session. These include Roundhill Magnificent Seven ETF (MAGS - Free Report) , MicroSectors FANG+ ETN (FNGS - Free Report) , Technology Select Sector SPDR Fund (XLK - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and First Trust Expanded Technology ETF (XPND - Free Report) .
Solid Growth Prospects of the Tech Space
The artificial intelligence (AI) craze will continue to fuel the rally in the sector with companies investing big on this technology. The expansion of AI applications holds the promise of ushering in fresh opportunities for growth 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.
The sector is well poised to benefit from the rate cuts expected this year. Inflation in the United States cooled down for the first time in six months, sparking new bets on Fed rate cuts as soon as September. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low (read: 3 Sector ETFs to Play on Renewed Fed Rate Cut Hopes).
The global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping, thereby bolstering strength in the sector. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.
Further, worldwide IT spending is expected to increase 8% year over year to $5.06 trillion this year, according to the latest forecast by Gartner. This will put worldwide IT spending on track to surpass $8 trillion well before the end of the decade. Higher spending across software, data center systems, IT services and semiconductors will provide a further boost to the sector.
ETFs in Focus
Roundhill Magnificent Seven ETF (MAGS - Free Report)
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $300.6 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: ETFs to Tap as Investors Turn 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 next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the stocks. MicroSectors FANG+ ETN has accumulated $269.8 million in its asset base and charges 58 bps in annual fees. It trades in average daily volume of 133,000 shares and has a Zacks ETF Rank #3 (Hold) (read: Tesla Turnaround in the Cards? Bet on These ETFs).
Technology Select Sector SPDR Fund (XLK - Free Report)
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 65 securities in its basket, with key holdings in software, semiconductors and semiconductor equipment, and technology hardware, storage and peripherals. Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with an AUM of $65.7 billion and an average daily volume of 6.1 million shares. The fund charges 9 bps 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, systems software, technology hardware storage & peripheral, and application software are the top four sectors. Vanguard Information Technology ETF has an expense ratio of 0.10%, whereas volume is solid at nearly 397,000 shares. It has a Zacks ETF Rank #1.
First Trust Expanded Technology ETF (XPND - Free Report)
First Trust Expanded Technology ETF is an actively managed ETF offering broad exposure to information technology companies or financial companies and communication services companies whose operations are principally derived from and/or dependent upon technology (such companies are collectively referred to herein as "Expanded Technology Companies"). It holds 50 bps in fees per year and charges 65 bps in annual fees. First Trust Expanded Technology ETF has managed assets worth $18.6 million in its asset base and trades in a daily volume of 3,000 shares on average.