Driven by robust spending among businesses and individuals to keep up with digital transformation and several technological innovations, the tech industry seems well-poised for exponential growth and expansion in the long term.
Given the industry’s solid footing, let’s look at the best-performing tech ETFs ARK Innovation ETF (ARKK), Global X Data Center REITs & Digital Infrastructure ETF (VPN), and Global X Social Media ETF (SOCL), with a high potential for returns and instant diversification.
The growing adoption of cutting-edge technologies, including AI, big data analytics, cloud, IoT, machine learning, AR&VR, blockchain, cyber security, and more, has sparked innovation and transformation in the business environment worldwide. Digital transformation assists businesses in saving costs by reducing manual labor, streamlining processes, and boosting productivity.
The global digital transformation market is expected to grow at a CAGR of 26.7% to reach $4.62 trillion by 2030. Meanwhile, the U.S. digital transformation market is projected to expand at a CAGR of 23.1% from 2023-2030.
The annual McKinsey Global Survey on the current state of AI confirmed the exponential growth of generative AI (gen AI) tools. One-third of the respondents stated that their organizations use gen AI daily in at least one business function.
Moreover, Gen AI has captured significant interest across the business landscape: individuals across regions, industries, and seniority levels using it for work and outside work. Nearly 79% of respondents said they had at least some exposure to gen AO, either for work or outside of work, while 22% hinted at regularly using it at work.
There is also an atmospheric rise in cloud computing. Cost, storage requirements, internal policies, and better control primarily drive demand for the cloud. The impact of enterprise IT spending cuts on cloud services is further slowly easing. During the third quarter of 2023, global spending on cloud infrastructure services totaled $73.50 billion, an increase of 16% year-over-year.
Amid rapid digitalization across several industries, tech spending is expected to remain robust in the foreseeable future. According to the latest forecast by Gartner, worldwide IT spending is expected to total $5.10 trillion in 2024, up 8% from 2023.
Moreover, digital technology has revolutionized how we communicate, work, shop, travel, manage our finances, and access entertainment, with the COVID-19 pandemic acting as a catalyst. Social networking is one of the most popular online activities around the globe. The social media market is expected to grow from $193.52 billion in 2022 to $231.10 billion at a CAGR of 19.4%.
Further, the social media market is anticipated to reach $434.87 billion by 2027, growing at a CAGR of 17.1%.
Given these encouraging trends, let’s look at the fundamentals of the top three Technologies Equities ETFs, beginning with number 3.
ETF #3: ARK Innovation ETF (ARKK)
ARKK is the flagship actively managed fund from the team at ARK Invest, an advisory firm led by Catherine Wood. Companies within the fund rely on or benefit from developing new products or services, technological improvements, and advancements in scientific research relating to DNA technologies, automation, AI, energy storage, and fintech innovation.
The fund has assets under management (AUM) of $7.75 billion. ARKK’s top holdings include Coinbase Global, Inc. Class A (COIN) with a 9.91% weighting, followed by Roku, Inc. Class A (ROKU) at 8.74%, and Tesla Inc. (TSLA) and Zoom Video Communications, Inc. Class A (ZM) at 8.34% and 7%, respectively.
The ETF has a total of 34 holdings, with its top 10 assets comprising 63.46% of its AUM. ARKK’s expense ratio is 0.75% compared to the category average of 0.49%. The fund flows came in at $164.08 million over the past month.
ARKK has surged 16.2% over the past month and 11.8% year-to-date to close the last trading session at $44.32. It has a beta of 1.64. The fund’s NAV was $44.33 as of November 22, 2023.
ARKK’s POWR Ratings reflect solid prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ARKK has an A grade for Trade and a B for Buy & Hold. Within the A-rated Technologies Equities ETFs group, it is ranked #56 of the 119 ETFs.
To access additional ARKK’s POWR Ratings (Peer), click here.
ETF #2: Global X Data Center REITs & Digital Infrastructure ETF (VPN)
VPN tracks a market-cap-weighted index of global equities involved in data center REITs and digital infrastructure. These companies engage in the ownership, operation, and development of data centers and cellular towers. In addition, included are the digital infrastructure firms that design, manufacture, or assemble the servers or other hardware for data centers and cellular towers.
The fund tracks the Solactive Data Center REITs & Digital Infrastructure Index. With $33.70 million in AUM, VPN’s top holdings are American Tower Corporation (AMT) with a 12.46% weighting, Equinix, Inc. (EQIX) at 12.02%, and Crown Castle Inc. (CCI) and Digital Realty Trust, Inc. (DLR) at 11.13% and 10.59%, respectively.
VPN has a total of 25 holdings, with its top 10 assets comprising 71.56% of its AUM.
The fund has an expense ratio of 0.40%, lower than the category average of 0.45%. VPN fund flows were $1.86 million over the three months and $1.99 million over the past six months. Also, over the past month, the fund flows came in at $5.35 thousand.
VPN pays an annual dividend of $0.33, which translates to a 2.45% yield at the current price level. The fund’s four-year average yield is 1.24%.
VPN has gained 16.2% over the past month and 9.7% over the six months to close the last trading session at $13.95. In addition, it has climbed 11.8% year-to-date. It has a beta of 1.62. The fund’s NAV was $13.91 as of November 22, 2023.
VPN’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. Of the 119 ETFs in the Technology Equities ETFs group, VPN is ranked #45.
Click here to see all the VPN ratings.
ETF #1: Global X Social Media ETF (SOCL)
SOCL provides exposure to companies involved in some way in social media, including companies that offer social networking, file sharing, and other web-based media applications. The fund delivers targeted access to a relatively new and potentially volatile corner of the global tech industry.
SOCL tracks the Stuttgart Solactive AG Social Media index. The fund has an AUM of $157 million. Its top holdings include Tencent Holdings Ltd. (TCEHY) with a 10.06% weighting, NAVER Corp. at 10.03%, and Meta Platforms Inc. Class A (META) and Kuaishou Technology Class B with 9.73% and 8.81% weightings, respectively.
The fund has a total of 44 holdings, with its top 10 assets comprising 71.79% of its AUM.
The fund has an expense ratio of 0.50%, lower than the category average of 0.57%. Over the past three months, SOCL fund flows came in at $15.61 million and $5.62 million over the past six months. Also, it has a beta of 0.91.
SOCL pays an annual dividend of $0.19, translating to a 0.49% yield at the current price level. The fund’s four-year average yield is 0.15%.
SOCL has gained 14.8% over the past month and 26.6% year-to-date to close the last trading session at $39.25. Also, the ETF has surged 38.6% over the past year. The fund has a NAV of $158.66 as of November 22, 2023.
SOCL’s POWR Ratings reflect this strong outlook. The ETF’s overall A rating translates to a Strong Buy in our proprietary rating system.
SOCL has an A grade for Buy & Hold and Trade. The fund tops the list of 119 ETFs in the same group.
To access all the POWR Ratings for SOCL, click here.
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ARKK shares were trading at $45.02 per share on Friday morning, up $0.70 (+1.58%). Year-to-date, ARKK has gained 45.31%, versus a 20.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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