The field of technology is ever-evolving. With new and more advanced breakthroughs every year, technology is changing the world for the better. With evolving demands by customers and businesses alike, innovation is key for the technology industry to keep moving forward.
Given this backdrop, it could be wise to scoop up shares of fundamentally sound tech ETFs, ARK Innovation ETF (ARKK), The Technology Select Sector SPDR Fund (XLK), and Vanguard Information Technology Index Fund ETF Shares (VGT) for significant gains.
The global technology landscape is buzzing with discussions about the rapid rise of Artificial Intelligence (AI) and Machine Learning (ML). These fields have transformed from simply generating text and images to becoming vital tools for decision-making, automation, and problem-solving across industries like biotechnology, data science, finance and more.
Statista forecasts that the AI market is expected to skyrocket, reaching $826.70 billion by 2030, at an impressive CAGR of 28.5%. The growth showcases the immense potential of AI and ML, as they continue to revolutionize sectors from marketing to healthcare, driving innovation and efficiency.
Beyond AI, technological advancements have given us Robotic Process Automation (RPA), streamlining repetitive business tasks with ease. The rollout of 5G technology further amplifies this progress, offering lightning-fast speeds, reduced latency, and enhanced network reliability, reshaping industries reliant on connectivity.
The influence of technology reaches across various sectors, continually fostering positive change and pushing boundaries. With these promising trends, tech-focused Exchange-Traded Funds (ETFs) present a valuable investment opportunity, providing exposure to the expanding tech sector while offering diversification for investors seeking steady returns.
Now, let us look at the fundamentals of the three Technology Equities ETFs, beginning with #3
ETF #3: ARK Innovation ETF (ARKK)
ARKK, launched and managed by ARK Investment Management LLC, focuses on disruptive innovation. The fund typically invests at least 65% of its assets in domestic and foreign equity securities of companies aligned with this theme. Its portfolio is built through fundamental and quantitative analysis, utilizing both bottom-up and top-down stock-picking strategies.
With $5.58 billion in assets under management (AUM), ARKK’s top holdings are Tesla, Inc. (TSLA) with a 13.15% weighting, followed by Roku, Inc. Class A (ROKU) at 10.82%, and Coinbase Global, Inc. Class A (COIN) at 7.96%.
ARKK has a total of 34 holdings, with its top 10 assets comprising 65.63% of its AUM. The fund has an expense ratio of 0.75%.
ARKK has surged 7.9% over the past six months and 27.5% over the past year to close the last trading session at $47.38. The fund’s NAV was $47.39 as of October 24, 2024.
ARKK’s POWR Ratings reflect its robust prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ARKK has an A grade for Trade. It is ranked #62 out of the 119 ETFs in the A-rated Technology Equities ETFs group.
Click here to see all the ARKK ratings.
ETF #2: The Technology Select Sector SPDR Fund (XLK)
XLK, introduced by State Street Global Advisors, Inc. and managed by SSGA Funds Management, Inc., follows a replication strategy. This means the fund invests in nearly all securities represented in the index, mirroring their proportions. At least 95% of its assets are allocated to securities within the index.
XLK has an AUM of $72.04 billion. Its top holdings include Apple Inc. (AAPL) with a 14.81% weighting, followed by NVIDIA Corporation (NVDA) at 14.58% and Microsoft Corporation (MSFT) at 13.12%. The fund has a total of 71 holdings, with its top 10 assets comprising 63.08% of its AUM.
XLK has an expense ratio of 0.09%. Its net inflows came in at $4.06 billion over the past year.
XLK has been paying dividends for 15 consecutive years. It pays an annual dividend of $1.56, which translates to a 0.67% yield at the current price level. Its dividend payouts have grown at a CAGR of 12.2% over the past three years.
XLK has gained 16.2% over the past six months and 39.6% over the past year to close the last trading session at $229.10. The fund’s NAV was $229.14 as of October 24, 2024.
XLK’s POWR Ratings reflect its strong fundamentals. The fund has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
XLK has an A grade for Trade and Buy & Hold. It is ranked #2 within the Technology Equities ETFs group.
To see all XLK’s POWR Ratings, click here.
ETF #1: Vanguard Information Technology Index Fund ETF Shares (VGT)
VGT, launched and managed by The Vanguard Group, Inc., uses an indexing investment approach. It aims to track the performance of the MSCI US Investable Market Index/Information Technology 25/50. This index includes stocks from large, mid-sized, and small U.S. companies within the information technology sector, as categorized by GICS.
With an AUM of $80.12 billion, VGT’s top holdings include AAPL with a 16.07% weighting, followed by MSFT at 13.96%, and NVDA at 13.92%. The ETF has a total of 318 holdings, with its top 10 assets comprising 58.08% of its AUM.
VGT’s expense ratio is 0.10%, lower than the category average of 0.58%. Its net inflows came in at $23.99 million over the past month and $3.26 billion over the past six months.
VGT pays an annual dividend of $3.73, which translates to a 0.63% yield at the current price level. The fund’s dividend payouts have increased at a CAGR of 10.2% over the past three years. Moreover, it has paid dividends for 18 consecutive years.
VGT has surged 21.2% over the past six months and 46.1% over the past year to close the last trading session at $599.12. The fund has a NAV of $599.09 as of October 24, 2024.
VGT’s strong prospects are mirrored in its POWR Ratings. The fund has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold and Peer. The fund has topped the 119-ETF Technology Equities ETFs group.
To access all of the VGT’s POWR Ratings, click here.
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VGT shares were unchanged in premarket trading Friday. Year-to-date, VGT has gained 24.44%, versus a 23.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal’s passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor’s degree in finance and is pursuing the CFA program.
She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More…