The technology industry has encountered numerous challenges in the past year, including a decrease in global technology spending and an increase in job layoffs. However, there are clear indications of improvement, with economists revising their recession forecasts downward and analysts expressing optimism about modest growth in the technology sector for the coming year.
Given this positive outlook, investing in technology Exchange-Traded Funds (ETFs) could be a prudent decision for those seeking to capitalize on the potential of the tech industry. Three standout ETFs in this regard are the First Trust Nasdaq Semiconductor ETF (FTXL), Global X Artificial Intelligence & Technology ETF (AIQ), and iShares Exponential Technologies ETF (XT).
The trend of increased spending on software and IT services indicates a shift back towards innovation and growth in the technology industry. A recent survey of tech executives supports this, with over half of respondents rating the tech industry as healthy or very healthy, and the majority expecting this trend to continue in the coming months.
The identified focus areas in the survey include efficiency, innovation, and productivity, with technologies such as Artificial Intelligence, cloud computing, cybersecurity, advanced connectivity, and generative AI driving growth in the industry. The rising adoption of AI is also leading to increased investments in cloud infrastructure, connectivity, and modernization, creating an ever-evolving and innovative tech landscape.
The optimism surrounding the technology industry is further supported by Gartner’s research, which predicts an 8% year-over-year increase in global IT spending by 2024, reaching a staggering $5.06 trillion. A significant portion of this spending surge is expected to come from software and IT services, driven by substantial investments in cybersecurity as AI adoption raises security concerns.
Exchange-Traded Funds (ETFs) provide a strategic way to invest in the technology sector, offering a diversified portfolio that reduces risk while capturing broad market opportunities. Rather than being reliant on the performance of individual stocks, ETFs allow investors to benefit from the collective growth of multiple companies in the tech sector.
Considering the projected growth in the global information technology market, which is estimated to reach $12.42 trillion by 2028, with a CAGR of 8.3%, investing in technology ETFs presents a compelling opportunity for investors.
Now, let’s take a closer look at the top three Technology Equities ETFs, starting with the third-ranked ETF.
ETF #3: First Trust Nasdaq Semiconductor ETF (FTXL)
FTXL seeks to track the performance of the Nasdaq US Smart Semiconductor Index and invests in companies within the information technology, semiconductors, and semiconductor equipment sectors. With an expense ratio of 0.60%, the fund has $1.49 billion in assets under management (AUM) and includes a mix of value, growth, and volatile stocks from companies of various market capitalizations.
The ETF’s top holdings include NVIDIA Corporation, QUALCOMM Incorporated, Applied Materials, Inc., and Broadcom Inc. With a solid 44.5% gain over the past year, FTXL’s promising outlook is reflected in its overall A rating, equating to a Strong Buy in the proprietary rating system.
Next up is ETF #2, the Global X Artificial Intelligence & Technology ETF (AIQ).
AIQ, managed by Global X Management Company LLC, focuses on investing in companies developing and using artificial intelligence technology, as well as those providing hardware for big data analysis. The fund’s total expense ratio is 0.68%, and it has $1.87 billion in assets under management (AUM). With a strong overall rating of A, AIQ’s solid prospects are evident, with a 28.3% gain over the past year.
Finally, let’s explore ETF #1, the iShares Exponential Technologies ETF (XT).
XT, managed by BlackRock Fund Advisors, invests globally in public equity markets and targets companies in the information technology sector, including growth and value stocks across various market capitalizations. It has an expense ratio of 0.46% and $3.36 billion in AUM. XT’s solid fundamentals are reflected in its overall rating of A, translating to a Strong Buy, with a 6.3% gain over the past nine months.
In conclusion, with the tech industry poised for growth and recovery, these top three ETFs offer investors a strategic way to capitalize on the potential of the tech sector. As always, it’s important for investors to conduct thorough research and consider their own financial goals and risk tolerance before making any investment decisions.