12 Best Technology ETFs To Buy
In this article, we discuss 12 best technology ETFs to buy. If you want to skip our discussion on the technology market, head directly to 5 Best Technology ETFs To Buy.
The pandemic had a profound impact on businesses around the world. As for the technology sector, COVID-19 induced a number of disruptions, while presenting plenty of opportunities as well. For instance, while the pandemic caused major supply chain issues for the semiconductor industry leading to massive shortages and delays, it also influenced a global need for remote work-spaces, online retail, telehealth, and EdTech. According to a report by Deloitte, the technology sector has not just endured these challenges, it has thrived. In 2023, while the slowing economy continues to put pressure on the industry, along with ongoing disruptions in supply chain and workforce, the industry is paving its path towards innovation.
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According to Gartner, the global spending in IT is forecasted to be roughly $4.6 trillion in 2023, increasing 5.5% since the previous year. Regardless of the concerns about the macroeconomic pressures, the IT sector is expected to expand, even in regions with flat GDP growth rates. Although the devices segment is estimated to decline by 5% during 2023, the software segment seems set for a double-digit growth rate. John-David Lovelock, VP Analyst at Gartner, stated:
“The macroeconomic headwinds are not slowing digital transformation. Prioritization will be critical as CIOs look to optimize spend while using digital technology to transform the company’s value proposition, revenue and client interactions.”
As per McKinsey, generative artificial intelligence is set to spearhead the need for innovation in the technology sector. While the potential for a framework based on artificial intelligence is endless, the business applications for the tech are expected to reduce development times, empower non-technical staff, and enable businesses to explore avenues for value addition through assistive technology. As per an estimate, innovation in generative artificial intelligence is expected to add $4.4 trillion in economic value by increasing productivity for businesses and consumers. Furthermore, investors seem confident about the potential for the tech sector, as investments worth nearly $1 trillion were made in the sector during 2022.
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In addition to artificial intelligence, another major focus for the tech sector is cybersecurity. According to a report by Fortune Business Insights, in 2022, the total market for cybersecurity was valued in excess of $172 billion and this is expected to increase to nearly $425 billion by 2030. As the number of data breaches continues to rise, businesses look towards improving safety measures. Data breaches affect everyone – consumers, businesses, and governments. The sensitive nature of data highlights a growing requirement for safety for all stakeholders involved. As the world continues to take steps towards digitization, the risk for such breaches only multiplies. According to McKinsey, the market opportunity for cybersecurity solutions can be valued in excess of $2 trillion. By 2025, the damage from cyber attacks is projected to cost $10.5 trillion annually. With numerous companies underfunded to improve their security measures, the opportunity lies in four major areas – cloud technologies, pricing mechanisms, artificial intelligence, and other managing services. With developments in artificial intelligence, companies such as Microsoft Corporation (NASDAQ:MSFT) are working on combining the two in products such as Microsoft Security Copilot. Similarly, investments in private cybersecurity companies continue to increase as well. Recently, cloud-based security firm Wiz managed to raise $300 million at a $10 billion valuation.
While inflation still remains high, sectors such as technology, healthcare, and industrials are expected to outperform the market and provide a cover for investors in 2023. Additionally, more than 75% of tech leaders expect a better performance for the tech sector during the year. This article discusses some of the best technology ETFs that provide investors with access to market leaders like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA).
Our Methodology
We used an ETF screener and filtered out the best performing technology ETFs based on 5-year share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These ETFs have amassed significant gains over the past 5 years. The list is ranked in ascending order of the 5-year share price performance of these technology ETFs as of September 12, 2023.
Photo by Adam Nowakowski on Unsplash
Best Technology ETFs To Buy
12. iShares Cybersecurity and Tech ETF (NYSE:IHAK)
5 Year Performance as of September 12: 57.85%
Introduced in June 2019, the iShares Cybersecurity and Tech ETF (NYSE:IHAK) seeks capital growth by replicating the performance of the NYSE FactSet Global Cyber Security Index. The index consists of companies engaged in the cyber security and technology sectors. As of September 8, the ETF maintains a portfolio of 37 companies, with total net assets worth $609.8 million, while sustaining an expense ratio of 0.47%.
Qualys, Inc. (NASDAQ:QLYS) is one of the largest holdings of the iShares Cybersecurity and Tech ETF (NYSE:IHAK). Qualys, Inc. (NASDAQ:QLYS) specializes in providing cloud-based solutions in IT, cybersecurity, and compliance. According to Insider Monkey’s second quarter database, 26 hedge funds were bullish on Qualys, Inc. (NASDAQ:QLYS). In comparison, 23 hedge funds had invested in the company during the preceding quarter.
Baron Discovery Fund said this about Qualys, Inc. (NASDAQ:QLYS) in its Q4 2022 investor letter:
“Qualys, Inc. (NASDAQ:QLYS), a cloud-based vulnerability management cybersecurity platform, detracted from performance. While third quarter revenue and profit beat consensus expectations, billings–a forward growth indicator based on contracts–decelerated slightly as the tough macro environment caused deal scrutiny, longer sales cycles among new customers, and a slower productivity ramp-up for newly hired sales reps. Despite near-term challenges, we think Qualys can continue compounding revenue and free cash-flow-per-share growth for several reasons.”
11. First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR)
5 Year Performance as of September 12: 62.85%
Launched in July 2015, the First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) aims to achieve investment results that mirror the performance of the Nasdaq CTA Cybersecurity Index. This index tracks the performance of tech firms engaged in the cybersecurity sector. As of September 9, the ETF manages total net assets worth $5.2 billion, while featuring an expense ratio of 0.60%. It ranks 11th on our list of the best technology ETFs.
Cisco Systems, Inc. (NASDAQ:CSCO) is one of the largest holdings of the First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR). Cisco Systems, Inc. (NASDAQ:CSCO) is a global leader in providing IP based networking, data-center, and infrastructure solutions. According to Insider Monkey’s second quarter database, a total of 55 hedge funds were bullish on Cisco Systems, Inc. (NASDAQ:CSCO), as opposed to 61 hedge funds in the previous quarter.
Similar to Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA), Cisco Systems, Inc. (NASDAQ:CSCO) is one of the best tech stocks to buy.
Artisan Value Fund had this to say about Cisco Systems, Inc. (NASDAQ:CSCO) in its Q4 2022 investor letter:
“We had one sale this quarter, exiting network equipment company Cisco Systems, Inc. (NASDAQ:CSCO). We chose to use the proceeds on more attractive value opportunities as Cisco’s growth has come in below what we had hoped for, and the company is increasingly looking at M&A to augment its growth rate.”
10. Invesco S&P 500 Equal Weight Technology ETF (NYSE:RSPT)
5 Year Performance as of September 12: 71.21%
First introduced in November 2006, Invesco S&P 500 Equal Weight Technology ETF (NYSE:RSPT) mirrors the performance of S&P 500 Equal Weight Information Technology Index. The ETF allocates a minimum of 90% of its total assets to the components of the index. As of September 8, the ETF has invested in 67 stocks, while maintaining an expense ratio of 0.40%. Invesco S&P 500 Equal Weight Technology ETF (NYSE:RSPT) is one of the best technology ETFs to invest in.
CDW Corporation (NASDAQ:CDW) is one of the top holdings of Invesco S&P 500 Equal Weight Technology ETF (NYSE:RSPT). CDW Corporation (NASDAQ:CDW) is a major provider for hardware and software solutions in North America, operating within three segments – Corporate, Small Business, and Public. According to Insider Monkey’s second quarter database, 33 hedge funds were bullish on CDW Corporation (NASDAQ:CDW). This number remained unchanged over the past quarter.
Cooper Investors Global Equities Fund said this about CDW Corporation (NASDAQ:CDW) in its second quarter 2023 investor letter:
“Retail cosmetics store roll-out Ulta Beauty and IT value-added reseller CDW Corporation (NASDAQ:CDW) are both leaders in their fields with substantial long duration opportunities to keep growing at attractive incremental rates of return. They have strong management teams who are focused on maximizing the long-term value of their businesses through sensible and disciplined capital allocation. However both enjoyed a period of overearning through the pandemic, with CDW benefitting from abnormally high IT spend and Ulta seeing demand spike for beauty products as consumers emerged from their lockdown cocoons. As the normalization of these trends produced an air pocket in demand management adjusted full year expectations and both shares sold off sharply; Ulta fell almost 30% in May, from $560 to $400, while CDW fell 25% between February and May, from $215 to $160.”
9. iShares Expanded Tech-Software Sector ETF (BATS:IGV)
5 Year Performance as of September 12: 78.44%
Introduced in July 2001, the objective for the iShares Expanded Tech-Software Sector ETF (BATS:IGV) is to track the performance of the S&P North American Expanded Technology Software Index, which consists of tech companies involved in software development, home entertainment, and computing solutions. As of September 13, the ETF manages total net assets worth $6.58 billion, while featuring an expense ratio of 0.41%. iShares Expanded Tech-Software Sector ETF (BATS:IGV) ranks 9th on our list of the best technology ETFs to buy.
Oracle Corporation (NYSE:ORCL) is one of the largest holdings of the iShares Expanded Tech-Software Sector ETF (BATS:IGV). Oracle Corporation (NYSE:ORCL) is one of the leading providers of cloud-based software solutions for enterprise management and other business services. According to Insider Monkey’s second quarter database, 84 hedge funds were bullish on Oracle Corporation (NYSE:ORCL), while 67 hedge funds had invested in the company during the past quarter.
Madison Sustainable Equity Fund had this to say about Oracle Corporation (NYSE:ORCL) in its second quarter 2023 investor letter:
“Oracle Corporation (NYSE:ORCL) reported a solid fiscal fourth quarter and provided guidance for the first quarter that continued to support solid growth for the company. Revenues grew 17% and were primarily driven by Cloud Services (up 29%) with Oracle’s cloud infrastructure (OCI) business growing 89% in the quarter. Oracle has messaged that this business has price-performance advantages as compared to the other infrastructure companies (Amazon, Microsoft, Google) and appears to be winning business as a result. On the earnings call, management made the case that OCI will play a significant role in the Generative AI workloads which bodes well for continued growth.”
8. First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC)
5 Year Performance as of September 12: 91.52%
First introduced in April 2006, the First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC) is an ETF that aims to mimic the performance of the Nasdaq-100 Technology Sector Index. As of September 13, the ETF manages a portfolio of 38 stocks with total assets worth nearly $3 billion, while maintaining an expense ratio of 0.57%. It is one of the best technology ETFs to invest in.
Atlassian Corporation (NASDAQ:TEAM) is one of the largest investments of First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC). Atlassian Corporation (NASDAQ:TEAM) offers software solutions for business and project management, such as Jira Software and Jira Work Management. According to Insider Monkey’s second quarter database, a total of 39 hedge funds were bullish on Atlassian Corporation (NASDAQ:TEAM). This number remained unchanged since the previous quarter.
Artisan Partners said this about Atlassian Corporation (NASDAQ:TEAM) in its Q4 2022 investor letter:
“Among our bottom contributors were Atlassian Corporation (NASDAQ:TEAM), SVB Financial Group and Catalent. The tougher macro environment caught up with Atlassian in the quarter as the company is seeing slower software user additions as customers of all sizes moderate hiring and spending. However, the company still expects to grow sales at a mid-20s rate in Q4 and grow its strategically important cloud revenues 40%–45%. These are slower rates than we expected, and could slow further, but Atlassian’s growth metrics remain solid in light of the environment. In the short term, slower revenue growth will likely pressure margins and profitability given the company’s rapid hiring expansion in recent periods. But we detect a meaningful shift in tone from management on expense growth and margins now that top-line growth is slowing. While we fully expect Atlassian to keep investing in its large growth opportunities, we think a prudent reprioritization of this spending will lead to margin tailwinds in the medium term. We are sensitive to the slowing near-term growth dynamics but believe remaining invested is appropriate given the longer term profit growth potential.”
7. Defiance Quantum ETF (NYSE:QTUM)
5 Year Performance as of September 12: 101.94%
Defiance Quantum ETF (NYSE:QTUM) was introduced in September 2018 to offer investors exposure to the leading tech companies specializing in machine learning, quantum computing, and cloud computing. The ETF tracks the performance of the BlueStar Quantum Computing and Machine Learning Index (BQTUM), which includes 71 tech companies. As of September 12, 2023, the ETF manages net assets worth $176.43 million, while featuring an expense ratio of 0.40%.
IonQ, Inc. (NYSE:IONQ) is the largest holding of the Defiance Quantum ETF (NYSE:QTUM). IonQ, Inc. (NYSE:IONQ) specializes in the production of quantum computing solutions and cloud-based services. According to Insider Monkey’s second quarter database, a total of 19 hedge funds were bullish on IonQ, Inc. (NYSE:IONQ). This number remained unchanged from the last quarter.
Like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA), IonQ, Inc. (NYSE:IONQ) is one of the best technology stocks to invest in.
6. Invesco QQQ Trust (NASDAQ:QQQ)
5 Year Performance as of September 12: 103.07%
Invesco QQQ Trust (NASDAQ:QQQ) was launched in March 1999 and aims to replicate the performance of the Nasdaq-100 Index, including major players such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT). Invesco QQQ Trust (NASDAQ:QQQ) offers investors exposure to leading tech firms that are engaged in fields such as Augmented Reality, Cloud Computing, Big Data, and Mobile Payments. As of September 13, the ETF manages assets worth $207 billion, while maintaining an expense ratio of 0.2%.
Amazon.com, Inc. (NASDAQ:AMZN) is one of the largest holdings of Invesco QQQ Trust (NASDAQ:QQQ). Amazon.com, Inc. (NASDAQ:AMZN) is a market pioneer in the e-commerce business that provides consumer products, streaming services, and consumer devices. According to Insider Monkey’s second quarter database, a total of 278 hedge funds were bullish on Amazon.com, Inc. (NASDAQ:AMZN). In comparison, 243 hedge funds had invested in the company during the preceding quarter.
Mairs & Power Growth Fund had this to say about Amazon.com, Inc. (NASDAQ:AMZN) in its second quarter 2023 investor letter:
“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.
Amazon had an impressive first half of the year as well with growth out of its retail segment but slightly slower growth in its cloud business. Customers optimized workloads for existing capacity they were already paying for rather than adding incremental capacity in the current environment. We remain very excited about the opportunity for the company to reduce the labor needs of its retail segment through the use of technology and automation in the future.”
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Disclosure: None. 12 Best Technology ETFs To Buy is originally published on Insider Monkey.
