The Technology Select Sector SPDR Fund ETF holds the top three technology companies by market capitalization, with Microsoft and Apple dominating, while Nvidia lags behind. The index’s rebalancing rules have created an unusual situation where Microsoft and Apple account for more than 20% each, while Nvidia represents less than 6%. However, Nvidia’s recent market cap surge will propel it to over 20% at the next rebalancing, resulting in the ETF selling off Apple shares to comply with the rules.
Investors who prefer ETFs with Microsoft and Nvidia exposure may find a better alternative in the Vanguard Cutting Edge Information Technology ETF. This fund maintains a more balanced approach to its top holdings, with Microsoft at 16.7%, Apple at 15.9%, and Nvidia at 14%. Additionally, the Vanguard ETF has a solid performance history and does not face the same rebalancing constraints as the State Street fund, making it a potentially smarter choice for tech investors seeking strong AI leaders exposure.
Article Source
https://www.fool.com/investing/2024/06/23/nvidia-microsoft-etf-alternative-xlk-vgt/
