Technology stocks have come under pressure recently after a strong start to the year, following a pullback in shares of NvidiaThe chip giant has helped grow the market in recent years as its chips have become the backbone of the buildout of artificial intelligence (AI) infrastructure.
With investors taking some profits in both Nvidia and the tech sector as a whole, now is a good time to buy some tech-heavy exchange-traded funds (ETFs). Let’s take a look at two great options.
Invesco QQQ ETF
The first great ETF option to consider is the Invesco QQQ ETF (NASDAQ: QQQ)The ETF looks to track the performance of the tech-heavy Nasdaq-100 index, which consists of the 100 largest stocks traded on the Nasdaq Stock Exchange.
About half of the ETF’s portfolio consists of stocks in the Information Technology sector, with another 15% in the related Communication Services sector. The top holdings in information technology include Apple with 9.2% of his portfolio, Microsoft with 8.2%, Nvidia with 7.2% and Broadcom at 4.9%, as of September 3.
On the Communication Services side, Alphabet represents 4.9% of its assets, followed by Meta platforms by 4.8%. Amazonis now classified as a stock in the consumer goods sector, such as TeslaThey represent 4.9% and 2.7% of the ETF’s investments respectively.
As you can see, investors are getting a lot of exposure to the world’s best tech companies through the Invesco QQQ ETF. These are also the companies that are best positioned to continue to benefit from AI.
Given the significant ways in which these tech leaders have helped shape the world we live in, it’s perhaps no surprise that the ETF has been a huge winner in recent years. Over the past decade, the ETF has generated a 418% return through the end of August, while over the past five years it has returned nearly 163%.
Now that the ETF has reached its previous highs, now is a good time to add it to your portfolio.
Vanguard Information Technology ETF
Another great tech focused ETF you can buy now is the Vanguard Information Technology ETF (NYSEMKT: VGT)This ETF tracks the performance of the MSCI US Investable Market Information Technology 25/50 index.
Like the QQQ ETF, the Vanguard Information Technology Index has been a strong performer in recent years. In fact, it has outperformed over the past five and 10 years. The ETF has returned nearly 181% cumulatively over the past five years and more than 532% over the past 10 years, through the end of August.
The ETF is made up entirely of tech stocks and is heavily weighted toward its three largest holdings. Apple is its largest holding, accounting for 17.2% of its portfolio, followed by Microsoft at 15.8% and Nvidia at 14.1%. After that, there’s a big drop, with Broadcom its fourth-largest holding at 4.8%.
Combined, the four largest holdings make up half of the portfolio. As such, the performance of those stocks will also have a significant impact on the performance of the ETF.
Given the heavy concentration in its top holdings, the Vanguard Information Technology ETF is a more aggressive investment. However, its top holdings are the largest tech companies in the world. They have reached their current size for a reason, and that is their operating and stock performance.
Just like the S&P 500 index and the Nasdaq-100. The MSCI index on which the Information Technology ETF is based is a market capitalization weighted index. These stocks have therefore earned their index weighting through their performance.
So for investors looking to pile even more heavily on the world’s largest tech companies, now is a great time to buy the Vanguard Information Technology ETF. It’s still a long way off the $609.15 peak it hit on July 15, meaning investors can pick up this outperforming ETF for about 10% below where it was trading less than two months ago.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 ETFs That Are Screaming Bargains in September After Nvidia-Led Tech Stock Selloff was originally published by The Motley Fool
