ETF Zoo: What Happens When Tech Eats the Entire Market?
The imminent SpaceX IPO will have both immediate and longer-ranging impacts on markets. Find out why one ETF Zoo crew member cautions investors to “hold onto your butts”, the risks of such a tech-dominant stock market, and more on this episode.
In this episode of the ETF Zoo, Dave Nadig, President & Director of Research at ETF.com and Sumit Roy, Senior ETF Analyst at ETF.com, talk with Cinthia Murphy, Director of Research at TMX VettaFi, and Todd Sohn, Senior ETF & Technical Strategist, Strategas Securities. The crew this week takes a long, hard look at the ballooning investment into tech, how advisors are thinking about thematics in the current, highly concentrated environment, SpaceX IPO valuations, and more.
You can also find this conversation on Spotify, Apple Podcasts, or over on our YouTube channel.
Everything Tech Everywhere, All at Once
The latest ETF Zoo episode was dominated by everything tech. Since the March 30 low, tech ETFs have pulled in a whopping $27 billion in flows, while every other sector combined has seen net outflows. The numbers are hard to ignore, with tech now making up nearly 40% of the S&P 500, semiconductors as a group are larger than all of the defensive sectors, and the iShares Semiconductor ETF (SOXX) literally doubled in two months without even being near a meaningful low. The crew debates whether this is dot-com bubble territory with Cinthia Murphy weighing in on investor preferences.
The thematic ETF space is getting in on the action too, with a flood of new filings targeting increasingly narrow AI-adjacent slices of the market, including memory chips, power infrastructure, photonics, and more. Todd Sohn noted that advisors seem to be using thematics to complement their already tech-heavy core holdings, layering in things like nuclear power or AI infrastructure on top. Meanwhile, the international angle is worth watching, with Korea popping off significantly this year on the back of the same memory and semiconductor story. Yet most U.S. investors still have minimal exposure to markets like Taiwan and Korea, which are unsurprisingly also deeply concentrated in just a handful of companies.
On a milestone front, the Vanguard S&P 500 ETF (VOO) officially overtook the SPDR S&P 500 ETF Trust (SPY) as the largest S&P 500 ETF, crossing $1 trillion in assets. The crew wasn’t exactly shocked as VOO and iShares' IVV have structural advantages over SPY (which operates as a UIT and can't reinvest dividends), and flows have been decisively moving toward lower-cost options for years. The broader takeaway was familiar that passive investing will always be the inevitable winner, and the concentration of money into index products is only going to raise more interesting questions as the IPO pipeline heats up.
Speaking of IPOs, SpaceX once again takes center stage in a Zoo episode. Morningstar valued it at roughly $800 billion, which means it's already coming to market at a significant premium to that estimate. The panel flagged some eyebrow-raising details, like the two-percent redemption gate that ER Shares, the most visible holder of private SpaceX shares, has put in place, and the fact that most fund holders own shares through an SPV with murky visibility into what's underneath. On a quieter but potentially important note, the episode closed with a look at 351 tax transfers, a growing corner of the ETF world that lets investors with low-basis concentrated stock positions diversify tax-efficiently, with minimums now dropping to $150,000 and advisor interest picking up fast.
Find out more about this episode’s guests:
Cinthia Murphy: TMX VettaFi and follow Cinthia on LinkedIn
Todd Sohn: Strategas and follow Todd on LinkedIn
