The technology sector in 2025 has experienced a dynamic and transformative year marked by innovation, adaptation and recalibration after several years of volatility. Artificial intelligence (AI) has continued to dominate the narrative, but the tone has changed. The initial frenzy surrounding generative AI has given way to more disciplined integration into business models and everyday workflows. Enterprises have moved beyond experimentation, focusing instead on practical deployment that improves productivity, customer engagement and decision-making.

At the same time, governments around the world have tightened regulations on data usage and AI ethics, prompting firms to balance innovation with accountability. This shift has marked a broader maturing of the sector’s approach to emerging technologies.

Supply chain disruptions and geopolitical tensions have led to a resurgence in semiconductor investment, domestic manufacturing and diversification of production bases. Cloud computing continues to evolve, but the emphasis has shifted toward hybrid and edge models that prioritize efficiency, security and data sovereignty. Consumer technology has shown signs of recalibration, too. The once-relentless pace of smartphone and gadget upgrades has slowed as users demand longer lifecycles and more meaningful innovation. Meanwhile, new interfaces such as mixed and augmented reality have begun to gain real traction, particularly in education, design and healthcare. The intersection of AI and immersive technologies has redefined what productivity and creativity can mean in a digital age.

Throughout the year, technology has remained a driver of global change, but it has done so with a more grounded and mature sense of purpose, setting the stage for a more stable and integrated digital future. On cue, the S&P 500 Technology Select Sector SPDR (XLK) has advanced a whopping 31.4% year to date. With interest rates expected to come down in the coming months, the sector may get a further boost.

Hence, astute investors may look to invest in technology mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

We have thus selected three such technology mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.

Fidelity Select Semiconductors (FSELX Quick QuoteFSELX - Free Report) primarily invests in common stocks, allocating the majority of its net assets to companies involved in semiconductor design, manufacturing, or sales. Using fundamental analysis, it selects domestic and foreign issuers based on financial health, industry position and market conditions.

Adam Benjamin has been the lead manager of FSELX since March 2020. Three major holdings for the fund are 24.7% in NVIDIA, 11.9% in Broadcom and 6.3% in NXP Semiconductors.

FSELX’s 3-year and 5-year annualized returns are 56.1% and 34.6%, respectively. Its net expense ratio is 0.62%. FSELX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

DWS Science and Technology (KTCAX Quick QuoteKTCAX - Free Report) invests the majority of its net assets in common stocks of science and technology companies, including IPOs. Primarily U.S.-focused, it may invest a portion abroad and concentrate holdings within the technology sector.

Sebastian P. Werner has been the lead manager of KTCAX since December 2017. Three major holdings for the fund are 10.7% in Microsoft, 10.5% in Nvidia and 9.7% in Meta.

KTCAX’s 3-year and 5-year annualized returns are 38.4% and 18.3%, respectively. Its net expense ratio is 0.88%. KTCAX has a Zacks Mutual Fund Rank #1.

Janus Henderson VIT Global Technology and Innovation Portfolio (JGLTX Quick QuoteJGLTX - Free Report) invests primarily in companies expected to benefit from technological advancements, with a substantial portion of assets in firms tied to various countries outside the United States. JGLTX maintains a non-diversified investment approach.

Denny Fish has been the lead manager of JGLTX since January 2016. Three major holdings for the fund are 14.3% in NVIDIA, 12.5% in Microsoft and 9.7% in Taiwan Semiconductor.

JGLTX’s 3-year and 5-year annualized returns are 38% and 16.5%, respectively. Its net expense ratio is 0.72%. JGLTX has a Zacks Mutual Fund Rank #1.

Want key mutual fund info delivered straight to your inbox?

Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>