10 Best Performing Technology ETFs in 2023

Published on August 26, 2023 at 10:35 am by Hamna Asim in ETF Trading, News

In this article, we discuss 10 best performing technology ETFs in 2023. If you want to skip our discussion on the current technology landscape, head directly to 5 Best Performing Technology ETFs in 2023.

In 2023, technology stocks are experiencing a strong surge in value following a significant decline in 2022. However, despite the substantial gains driven partially by the recent hype around artificial intelligence, investors in ETFs are not uniformly rushing to invest in the sector. The movement of money within the technology sector this year has left Todd Sohn, an ETF strategist at Strategas, perplexed. In June 2023, he pointed out the outflow of funds from two major ETFs – the Technology Select Sector SPDR Fund (NYSE:XLK), which mirrors a tech stock index in the S&P 500, and the Invesco QQQ Trust (NASDAQ:QQQ), providing investors exposure to the tech-focused Nasdaq-100 index. Despite both ETFs surging by more than 30% this year following a dismal performance in 2022, Sohn identified the outflows from the Invesco QQQ Trust (NASDAQ:QQQ) in this year as unusual. He noted that even though investors are gravitating toward the smaller, more economical version of the fund, the Invesco NASDAQ 100 ETF (NASDAQ:QQQM), for tech exposure, the substantial gains of the former haven’t been accompanied by a clear trend of herd behavior. Regarding the Technology Select Sector SPDR Fund (NYSE:XLK), ETF investors seem to still harbor “some skepticism” about the recovery of the U.S. equity market from the harsh downturn of the previous year, Sohn commented.

Dave Nadig, a financial futurist at VettaFi, believes that another profitable stretch awaits in the technology and artificial intelligence space. However, he indicated that there are constraints to the potential upside. Nadig forecasted that the sectors set to experience the most significant growth are industrial, robotics, and automation. He commented:

“AI is going to have a long-term and significant positive effect on GDP … [But] it’s very difficult to pick public companies that are going to be the outsized beneficiaries of that. We run into this all the time when we have cool new technology … and we end up buying Google and Microsoft and Apple and Nvidia, which we all already probably own too much of.”

NVIDIA Corporation (NASDAQ:NVDA) CEO Jensen Huang expects that the surge in artificial intelligence will extend well into 2024. To substantiate his optimism, he made what could possibly be the largest individual investment in the technology sector. NVIDIA Corporation (NASDAQ:NVDA)’s Q2 financial results exceeded Wall Street’s predictions, and the company disclosed intentions to repurchase an additional $25 billion worth of its own common shares – a strategy commonly employed when a company’s leadership believes its value is underrated. Although NVIDIA Corporation (NASDAQ:NVDA)’s stock price has surged by over threefold this year and was poised to achieve a record peak following Q2 results, the company intends to boost the production of its hardware well into the following year. This has effectively dispelled concerns raised by a few analysts regarding the sustainability of the AI frenzy. Additionally, NVIDIA Corporation (NASDAQ:NVDA) enjoys a near-monopoly over the computing systems that drive services like ChatGPT.

In this article, we discuss some of the best performing technology ETFs in 2023, which offer investors exposure to Broadcom Inc. (NASDAQ:AVGO), Microsoft Corporation (NASDAQ:MSFT), and DraftKings Inc. (NASDAQ:DKNG).

Our Methodology

We used an ETF screener and filtered out the best performing technology ETFs in 2023 based on year-to-date 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 in 2023. The list is ranked in ascending order of the year-to-date share price performance of these technology ETFs as of August 24, 2023.

Photo by Austin Distel on Unsplash

Best Performing Technology ETFs in 2023

10. Invesco QQQ Trust (NASDAQ:QQQ)

YTD Share Price Performance as of August 24: 39.82%

From its inception in 1999, Invesco QQQ Trust (NASDAQ:QQQ) has consistently shown a track record of strong performance, often surpassing the S&P 500 Index. Invesco QQQ Trust (NASDAQ:QQQ) tracks the Nasdaq-100 Index and includes prominent technology stocks. The fund features an expense ratio of 0.2% and holds 101 stocks in its portfolio. As of August 23, 2023, Invesco QQQ Trust (NASDAQ:QQQ) has $200.91 billion in assets under management. It is one of the best performing ETFs in the technology sector.

Apple Inc. (NASDAQ:AAPL) is the largest holding of Invesco QQQ Trust (NASDAQ:QQQ). On August 3, Apple Inc. (NASDAQ:AAPL) announced financial results for its fiscal 2023 third quarter ended July 1, 2023. The company reported earnings per share of $1.26, beating market estimates by $0.07. The revenue came in line with Wall Street consensus at $81.8 billion.

According to Insider Monkey’s second quarter database, 135 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL), compared to 131 funds in the preceding quarter. Warren Buffett’s Berkshire Hathaway is the leading position holder in the company, with 915.5 million shares worth $177.6 billion.

Like Broadcom Inc. (NASDAQ:AVGO), Microsoft Corporation (NASDAQ:MSFT), and DraftKings Inc. (NASDAQ:DKNG), Apple Inc. (NASDAQ:AAPL) is one of the best technology stocks to buy.

Choice Equities Capital Management made the following comment about Apple Inc. (NASDAQ:AAPL) in its second quarter 2023 investor letter:

“Dramatic valuation differences across market cap sizes continue. This has been the case for some time now. Perhaps I have spent too much time discussing these dichotomies, as generally, I feel like if we pick the right stocks and manage market exposures thoughtfully, our equities- oriented portfolio will prosper across various market cycles. However, when markets become as lopsided as they have lately, I feel additional discussion on the market environment is worthwhile, if only to help highlight the opportunities that are available and the likely path forward. I expect future discussions to soon be focused again on our moderately concentrated portfolio. But for now, let’s take one last in-depth look at how far reaching these valuation dichotomies have again become.(Please note: charts that accompany the following can be found in the Appendix.)

Take Apple Inc. (NASDAQ:AAPL) for example. It is the largest stock by market cap, and fairly considered one of the best companies in the world. The company has been extraordinarily successful and improved standards of living everywhere in the process with their ubiquitous products. Along the way, shareholders have been richly rewarded, with shares increasing nearly fourteen-fold over the last ten years while generating an annualized total shareholder return of 31%, including dividends.

On the back of another big quarter for large cap tech, it is now the first stock to surpass the $3T market cap threshold. This makes its weighting in the ~$37T market cap of the S&P 500, ~8%. It also means this one stock’s market cap is larger than that of the entire ~$2.98T market cap of the Russell 2000 index, the first time in history a single stock has outweighed the Russell 2000 – aside from two brief days in September 2020 when Apple’s market cap then accomplished the same…” (Click here to read the full text)

9. First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC)

YTD Share Price Performance as of August 24: 40.33%

First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC)’s primary goal is to imitate the price and yield performance of the Nasdaq-100 Technology Sector™ Index. The ETF was established on April 19, 2006. As of May 2023, First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC) maintains an expense ratio of 0.57% and its total net assets amount to $1.9 billion. It is one of the best performing technology ETFs in 2023, with year-to-date share price gains of 40.3% as of August 24.

Lam Research Corporation (NASDAQ:LRCX), the largest holding of First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ:QTEC), engages in the production, reconditioning, and maintenance of machinery employed in the processing of semiconductors and integrated circuits. On August 24, Lam Research Corporation (NASDAQ:LRCX) declared a $2.00 per share quarterly dividend, a 15.9% increase from its prior dividend of $1.73. The dividend is payable on October 4, to shareholders of record on September 13.

According to Insider Monkey’s second quarter database, 69 hedge funds were bullish on Lam Research Corporation (NASDAQ:LRCX), compared to 64 funds in the preceding quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 2.35 million shares worth $1.5 billion.

Saltlight Capital made the following comment about Lam Research Corporation (NASDAQ:LRCX) in its second quarter 2023 investor letter:

“Lam Research Corporation (NASDAQ:LRCX), a leading toolmaker for memory and logic semiconductor fabs, has demonstrated its resilience and competitive positioning in the semiconductor ecosystem. Chip densities are now approaching the limits of physics and Moore’s law is stretched to its atomic limitations. Future innovation is around 3D stacks of chips and advanced packaging. LAM has heavily invested in tools that push innovation at the atomic level. Despite this investment, it requires little shareholder capital to grow and therefore it returns capital through healthy dividends and share repurchases. LAM has been a wonderful performer for us over the last two years.”

8. iShares Expanded Tech Sector ETF (NYSE:IGM)

YTD Share Price Performance as of August 24: 41.39%

iShares Expanded Tech Sector ETF (NYSE:IGM) aims to replicate the investment outcomes of the S&P North American Expanded Technology Sector Index, which includes technology sector firms in North America, along with companies from communication services and consumer discretionary sectors. iShares Expanded Tech Sector ETF (NYSE:IGM) was established on March 13, 2001. As of August 23, 2023, the ETF holds net assets amounting to $3.20 billion and features an expense ratio of 0.41%. The fund’s portfolio consists of 280 stocks.

NVIDIA Corporation (NASDAQ:NVDA) is the biggest holding of the iShares Expanded Tech Sector ETF (NYSE:IGM). On August 23, NVIDIA Corporation (NASDAQ:NVDA) reported a Q2 non-GAAP EPS of $2.70 and a revenue of $13.51 billion, topping market expectations by $0.61 and $2.43 billion, respectively.

According to Insider Monkey’s Q2 data, NVIDIA Corporation (NASDAQ:NVDA) was found in 175 hedge fund portfolios, compared to 132 in the prior quarter. Philippe Laffont’s Coatue Management is a prominent stakeholder of the company, with 4.6 million shares worth nearly $2 billion.

Baron Fifth Avenue Growth Fund made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its second quarter 2023 investor letter:

“NVIDIA Corporation (NASDAQ:NVDA) Corporation is a fabless semiconductor company focused on designing chips and software for gaming and accelerated computing. Shares continued their torrid first quarter rise, increasing 52.3% in the second quarter (now up 190% year-to-date), after the company reported a meaningful acceleration in demand for its data center GPUs, which drove a material guidance beat with revenues expected to increase from $7.2 billion to approximately $11 billion sequentially. This unprecedented acceleration is driven by growing demand for GenAI. We are at the tipping point of a new era of computing with NVIDIA at its epicenter. While the opportunity within the datacenter installed base is already large at approximately $1 trillion, the pace of innovation in AI in general, and GenAI in particular, should drive a significant expansion in the addressable market, as AI creates a new way for human-computer interaction through language, and as companies are better able to utilize their data for decision-making. We remain shareholders as we believe NVIDIA’s end-to-end AI platform and the ecosystem it has cultivated over the last 15 years will benefit the company for years to come.”

7. ARK Fintech Innovation ETF (NYSE:ARKF)

YTD Share Price Performance as of August 24: 41.78%

ARK Fintech Innovation ETF (NYSE:ARKF) is an actively managed ETF aiming to attain long-term capital appreciation by investing in domestic and international stocks of firms involved in innovative financial technology. Established on February 4, 2019, ARK Fintech Innovation ETF (NYSE:ARKF) comes with an expense ratio of 0.75%. Its portfolio consists of around 35-55 stocks. ARK Fintech Innovation ETF (NYSE:ARKF) is one of the top performing technology ETFs this year.

Crypto giant Coinbase Global, Inc. (NASDAQ:COIN) is the largest holding of ARK Fintech Innovation ETF (NYSE:ARKF). On August 21, Coinbase Global, Inc. (NASDAQ:COIN) announced that it is investing in Circle, the company behind the creation of USD Coin, a stablecoin pegged to the US dollar. This move by Coinbase Global, Inc. (NASDAQ:COIN) demonstrates its support for stablecoins.

According to Insider Monkey’s second quarter database, Coinbase Global, Inc. (NASDAQ:COIN) was part of 27 hedge fund portfolios, compared to 28 in the earlier quarter. Cathie Wood’s ARK Investment Management is the biggest stakeholder of the company, with 12.12 million shares worth $867.3 million.

Here is what Hayden Capital has to say about Coinbase Global, Inc. (NASDAQ:COIN) in its Q2 2022 investor letter:

“Coinbase (NASDAQ:COIN): The crypto ecosystem moves extremely quickly, and there’s been many new developments since we first invested in Coinbase, a year ago. Most notably, crypto market cap has declined from a peak of ~$3 Trillion last fall, to ~$1.1 Trillion today (a -63% decline, and -72% peak-to-trough; LINK). Crypto is a volatile asset class, and has experienced many draw-downs of similar magnitude in the past. For example, Bitcoin was down -93% during 2011, -85% from 2013-15, and -84% from 2017-18. In this context, the latest draw-down is a pretty normal outcome for this emerging asset class.

A large reason for this volatility is simply because there aren’t any major “real-world use cases” for the asset just yet. In our letter outlining the investment last year, we wrote that crypto is still “in the middle of ‘crossing the chasm’ into mainstream adoption & use cases, which will result in millions of mainstream users needing to transact crypto in some form”…” (Click here to see the full text)

6. SPDR NYSE Technology ETF (NYSE:XNTK)

YTD Share Price Performance as of August 24: 44.86%

SPDR NYSE Technology ETF (NYSE:XNTK)’s objective is to achieve investment outcomes that, prior to deducting fees and costs, closely match the overall return performance of the NYSE Technology Index. This index includes equities within the information technology sector as well as technology-related stocks within the consumer discretionary sector. As of August 24, 2023, the ETF comes with an expense ratio of 0.35%. Its portfolio consists of 35 stocks. SPDR NYSE Technology ETF (NYSE:XNTK) is one of the best performing technology ETFs in 2023.

Meta Platforms, Inc. (NASDAQ:META) is one of the top holdings of SPDR NYSE Technology ETF (NYSE:XNTK). Following its strong performance in the second quarter and the positive guidance provided, Wall Street analysts showered Meta Platforms, Inc. (NASDAQ:META) with praise. On July 27, Ronald Josey, a Citi analyst, reaffirmed a Buy recommendation on Meta Platforms, Inc. (NASDAQ:META). He highlighted the impressive reception of fresh advertising formats such as Sponsored Reels and the popularity of Click-to-WhatsApp among advertisers.

According to Insider Monkey’s second quarter database, 225 hedge funds were long Meta Platforms, Inc. (NASDAQ:META), compared to 220 funds in the prior quarter. Chase Coleman’s Tiger Global Management is the leading stakeholder of the company, with 8.5 million shares worth $2.45 billion.

In addition to Broadcom Inc. (NASDAQ:AVGO), Microsoft Corporation (NASDAQ:MSFT), and DraftKings Inc. (NASDAQ:DKNG), Meta Platforms, Inc. (NASDAQ:META) is one of the best tech stocks to invest in.

Giverny Capital Asset Management made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its second quarter 2023 investor letter:

“I have believed for a while that we’re better served with a lower weight to the tech giants – we own Alphabet (8.1% of our model portfolio at the end of June) and Meta Platforms, Inc. (NASDAQ:META) (5.2%) for a 13.3% exposure, or about half the Index’s weight in the giants. And while Alphabet’s 36% return for the first half and Meta’s 138% return were gratefully received, I’m pleased to report that if we strip out that contribution to our overall return, the other 23 stocks we own, constituting 85% of our portfolio (with cash making up the balance), were up 10.2% on a weighted basis.

GCAM owns two of the seven tech mega caps in Alphabet and Meta, and they enjoyed similar rises. As mentioned, Alphabet A&C shares rose 36% while Meta rose 138%. Together, they added 2.38 percentage points to the overall Index return, meaning these seven tech giants cumulatively generated 12.4 percentage points of return, or roughly three-quarters of the Index’s return.

Alphabet and Meta combined sport a $2.25 trillion market cap and between them should generate roughly $120 billion of pretax profit this year. That’s a multiple of 19 times pretax profit, a substantial discount to Microsoft and Apple, and an even larger discount to Amazon, Nvidia and Tesla.”

Click to continue reading and see 5 Best Performing Technology ETFs in 2023.

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Published on November 16, 2024 at by Insider Monkey Staff

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