The three largest technology companies currently are NVIDIA, Microsoft, and Apple, each valued at over $3.25 trillion. The State Street Technology Select Sector SPDR Fund tracks these companies but faces a situation where Microsoft and Apple dominate the ETF, while NVIDIA’s weight is much lower. The ETF’s rules limit the holdings of each company to prevent overexposure. However, NVIDIA’s market cap recently surpassed Apple’s, leading to an upcoming rebalancing that will significantly increase NVIDIA’s weighting while reducing Apple’s.
This rebalancing will force the ETF to buy a large amount of NVIDIA stock at high prices and sell off Apple stock. The dominance of these two companies in the ETF raises questions about whether investors should consider other options. One alternative is the Vanguard Cutting Edge Information Technology ETF, which has more balanced holdings, including NVIDIA, Microsoft, Apple, Broadcom, Advanced Micro Devices, and Qualcomm. This ETF has a strong track record of returns and avoids the same rebalancing issues faced by the State Street fund.
Investors looking for exposure to NVIDIA and Microsoft may find the Vanguard ETF a more attractive long-term option. While Select Sector SPDR Trust has its merits, the concerns around rebalancing and potential high prices make the Vanguard ETF a potentially better choice for investors seeking heavy AI-related investments.
Before investing in the Select Sector SPDR Trust – The Technology Select Sector SPDR Fund, investors should consider other options like the Vanguard Cutting Edge Information Technology ETF, which offers a more balanced approach to tech investments. This alternative ETF could provide better long-term returns without being subject to the same rebalancing constraints as the State Street fund.
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https://finance.yahoo.com/news/nvidia-microsoft-over-40-popular-093600965.html