Technology investors are partying like it's 1999. That was the infamous final year of the dot-com bubble, when the tech-heavy Nasdaq rose a whopping 86%, an impressive end to one of the greatest bull markets in history.
Today's rally may not be as heady as it was back then―nor share prices as inflated―but for the first time in nearly two decades, tech is back to hitting new highs on a consistent basis. As measured by the Technology Select Sector SPDR Fund (XLK), tech is the top-performing sector of the year, with a return of 15.8%, more than double the gain of the broader S&P 500.
Tech heavyweights like Apple, Google, Microsoft and Facebook are hitting new records seemingly every day. Their combined weighting in the S&P 500 is now 11%, while tech as a whole accounts for 23% of the index.
It's not just the giants. Tech companies big and small are performing well this year, as evidenced by the 15.9% return for the Guggenheim S&P 500 Equal Weight Technology ETF (RYT), a fund that gives the same weighting to Apple as it does to every other tech stock in its portfolio.
Indeed, to see the best returns among tech-focused exchange-traded funds, investors must venture outside of broad tech ETFs into more niche areas, and in a few cases, outside the U.S. altogether. Here are the top tech ETFs of the year so far.
China Internet ETFs
At the top of the tech heap are internet ETFs focused on China. The Emerging Markets Internet & Ecommerce ETF (EMQQ) holds internet-related companies across emerging and frontier markets, but China accounts for about two-thirds of the portfolio.
Top holdings such as Tencent, Alibaba and Naspers have been on fire this year, buoying EMQQ to a year-to-date gain of 43.4%.
Though not focused on China, another international tech fund to see sizzling returns this year is the SPDR S&P International Technology Sector ETF (IPK), with its 23.4% gain. IPK holds a market-cap-weighted basket of tech stocks in developed markets outside of the U.S. Because it targets developed markets, it excludes China, giving it much different exposure than the aforementioned ETFs.
Currently, its three largest holdings are Samsung, SAP and ASML Holding.
Disruptive Technology ETFs
Back in the U.S., the top tech-focused fund is the ARK Web x.0 ETF (ARKW), with a nice 33.5% return for the year so far. ARKW is an actively managed ETF that invests in companies that are "expected to benefit from shifting the bases of technology infrastructure to the cloud." Stocks held include firms tied to cloud computing, cyber security, big data, e-commerce and social media platforms.
The ETF also holds a 6% position in the Bitcoin Investment Trust (GBTC), something that has served it well, as prices for the digital currency have exploded to the upside recently. Other top holdings include Athenahealth, Amazon and 2U Inc.
ARKW is one of five ETFs from ARK Invest, an issuer that focuses on "disruptive innovation." Another of the firm’s active funds to do well so far this year is the ARK Industrial Innovation ETF (ARKQ), with its 29.3% return. ARKQ invests in companies that are poised to benefit from technological advances related to energy, automation, manufacturing and transportation. Top holdings include Stratasys, Tesla and Nvidia.
Social Media ETFs
Shares of Snapchat parent Snap Inc. may be struggling this year, but an ETF that holds social media companies more broadly is doing just fine. The Global X Social Media ETF (SOCL) is up a solid 32.7% year-to-date.
As the name suggests, SOCL holds a basket of social media stocks from all around the world. From Tencent to Twitter to Facebook, SOCL is a social media pure-play ETF.
Sharing some overlap with SOCL is the PowerShares Nasdaq Internet Portfolio (PNQI). PNQI's focus is broader in that it holds shares of internet companies in general. All of its holdings are U.S.-listed, but can be headquartered anywhere.
Amazon, Facebook and Netflix are the top three holdings currently, and the fund is up 25.2% year-to-date.
For a full list of this year's top technology ETFs, see the table below:
Top 15 Technology ETFs
|EMQQ||Emerging Markets Internet & Ecommerce ETF||43.40|
|KWEB||KraneShares CSI China Internet ETF||41.41|
|ARKW||ARK Web x.0 ETF||33.53|
|SOCL||Global X Social Media ETF||32.65|
|CQQQ||Guggenheim China Technology ETF||29.91|
|ARKQ||ARK Industrial Innovation ETF||29.26|
|PNQI||PowerShares NASDAQ Internet Portfolio||25.22|
|IGV||iShares North American Tech-Software ETF||25.08|
|IPK||SPDR S&P International Technology Sector ETF||23.40|
|PSI||PowerShares Dynamic Semiconductors Portfolio||22.47|
|PRNT||3D Printing ETF||22.35|
|QTEC||First Trust NASDAQ-100 Technology Sector Index Fund||21.44|
|FINX||Global X FinTech ETF||20.65|
|IXN||iShares Global Tech ETF||20.39|
|MTK||SPDR Morgan Stanley Technology ETF||20.29|
Contact Sumit Roy at [email protected]