The start of the year 2022 has witnessed myriad hurdles for the technology sector. The Nasdaq Composite index lost about 8.9% in the first month of the year. Also, the tech-heavy index witnessed its worst month since March 2020. It is also in the correction territory as the index has declined about 12% from its high level.
Meanwhile, investors returned to their favorite sector to buy the dip in some tech shares as the Nasdaq Composite rebounded 3% and 3.4% on Jan 28 and Jan 31, respectively. The stock of Tesla (NASDAQ:TSLA) TSLA saw an upgrade from Credit Suisse (SIX:CSGN) on Jan 31 whereas, Netflix (NASDAQ:NFLX) NFLX and Spotify (NYSE:SPOT) witnessed upgrades from Citi on the same day (per a CNBC article). The shares of NVIDIA NVDA were also up 7% on Jan 31.
Investors willing to be part of the tech rally can bet on some top-ranked technology ETFs like Vanguard Information Technology ETF VGT, The Technology Select Sector SPDR Fund XLK, iShares U.S. Technology ETF IYW and First Trust NASDAQ-100-Technology Sector Index Fund QTEC.
There is no denying that the rising benchmark 10-year Treasury yields, which went up as high as above 1.9% after standing at 1.51% on Dec 31, led the market bloodbath. Growth sectors like the tech space have been feeling the pain of rising bond yields as the same decreases the relative value of future earnings, making the popular stocks seem overvalued. Tech companies also face hurdles in funding their growth and buying back stocks due to higher rates (per a CNBC article).
Meanwhile, technology has held a dominant position in the ongoing health crisis. Telemedicine and Digital Health received significant importance. Data management and storage have become integral aspects of healthcare in the present era. Thus, with the technological advancements in the healthcare sector and the rising adoption of healthcare IT solutions as well as advantages of cloud usage healthcare, the cloud computing market is on a growth trajectory.
The work-from-home model has bumped up sales of PCs, laptops and other kinds of computer peripherals. Certain other ‘new normal’ trends have also emerged amid the health crisis like work from home, increasing digital payments, growing video streaming and soaring video game sales.
The pandemic has been a blessing in disguise for the e-commerce industry as people are practicing social distancing and shopping online for all essentials, especially food items. The world is gradually moving toward digitization, increasing the dominance of technology in the financial sector. A Market Data Forecast (MDF) report also highlights the expanding opportunities in the global financial technology market, which is expected to see a CAGR of 23.4% between 2021 and 2026.
The video gaming industry continues to gain amid the health crisis as consumers spend generously, hitting record-breaking highs in 2021. Market experts are positive about the video gaming industry's strength in terms of solid sales growth despite tough year-over-year comparisons, highlighting the momentum in the space. Recently-released data from The NPD Group emphasizes that the video game industry, including packaged media, digital, consoles and accessories, witnessed robust sales in 2021, with people spending $60.4 billion in all, reflecting 8% growth year over year.
The semiconductor space received a good push from the ongoing COVID-19 pandemic as demand for consumer electronics like personal computers, laptops and smartphones shot up. Notably, the chip market has witnessed strength in the end markets like mobile phones, notebooks, servers, automotive, smart home, gaming, wearables and Wi-Fi access points, per an International Data Corporation (IDC) report.
The space has also seen accelerating demand with the growing usage of electronic vehicles along with the automobile sector becoming specifically advanced to include more electronic components in vehicles that rely on chips.
Technology ETFs to Keep a Track of
All the factors discussed above highlight the instrumental role that technology plays amid the ongoing COVID-19 uncertainty in aiding people to maintain safe-distancing norms. Thus, investors could consider the following ETFs:
Vanguard Information Technology ETF
Vanguard Information Technology ETF seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. VGT has AUM of $48 billion. It charges investors 10 basis points (bps) in annual fees. Vanguard Information Technology ETF currently sports a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read: 5 ETFs to Cash in on Microsoft-Activision Deal).
The Technology Select Sector SPDR Fund
The Technology Select Sector SPDR seeks to provide investment results that before expenses generally correspond with the price and yield performance of the Technology Select Sector Index. XLK has AUM of $45.15 billion. It charges investors 10 bps in annual fees. The Technology Select Sector SPDR presently flaunts a Zacks ETF Rank of 1, with a Medium-risk outlook (read: Cybersecurity ETFs Win in Nasdaq's Worst Week Since 2020).
iShares U.S. Technology ETF
iShares U.S. Technology ETF seeks to provide investment results that before expenses generally correspond with the price and yield performance of the Russell 1000 Technology RIC 22.5/45 Capped Index. IYW has AUM of $8.22 billion. It charges investors 41 bps in annual fees, as stated in the prospectus. iShares U.S. Technology ETF currently sports a Zacks ETF Rank #1, with a Medium-risk outlook (read: Apple (NASDAQ:AAPL) Hits $3T Market Cap for The First Time: ETFs to Buy).
First Trust NASDAQ-100-Technology Sector Index Fund
First Trust NASDAQ-100-Technology Sector Index Fund seeks to replicate as closely as possible, before fees and expenses, the price and yield of the NASDAQ-100 Technology Sector Index. QTEC has AUM of $3.33 billion. It charges investors 57 bps in annual fees. First Trust NASDAQ-100-Technology Sector Index Fund also flaunts a Zacks ETF Rank #1 at present, with a High-risk outlook.
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Netflix, Inc. (NFLX): Free Stock Analysis Report
NVIDIA Corporation (NASDAQ:NVDA): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Technology Select Sector SPDR ETF (NYSE:XLK): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
First Trust NASDAQ100Technology Sector ETF (QTEC): ETF Research Reports
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