Growing digitalization across end-use industries and several technological breakthroughs position the technology industry for significant growth and expansion in the long run. Thus, it could be wise to invest in top-performing tech ETFs ARK Innovation ETF (ARKK) and ROBO Global Artificial Intelligence ETF (THNQ) for instant diversification and solid returns.
Before delving deeper into the fundamentals of these ETFs, let’s look at what’s happening in the technology industry.
Digital technologies are rapidly reshaping business models in all aspects to meet market change and business requirements. Several industries, such as communications, finance, retail, healthcare, education, automotive, manufacturing, etc., are being disrupted by digital trends to handle rising competition, leverage powerful tools, harness automation, etc.
Rapid digital transformation worldwide creates numerous growth opportunities for companies operating in areas: information technology (IT), software, communications equipment, electronics, data storage, and telecommunications. The global IT market is expected to reach nearly $12 trillion in 2027, expanding at a CAGR of 7.9% during the forecast period (2023-2027).
Due to the COVID-19 pandemic, which caused an increased reliance on remote work, most businesses migrated their workloads to the cloud. With certain essential features such as high availability, scalability, cost efficiency, business continuity, and disaster recovery, the adoption of cloud-based platforms among enterprises continues to grow significantly.
The global cloud computing market is expected to hit $2.30 trillion by 2032, growing at a CAGR of 17% from 2023 to 2032. Meanwhile, the U.S. cloud computing market is estimated to be worth $458.45 billion by 2032, exhibiting a CAGR of 16.8%.
The increasing adoption of cutting-edge technologies like cloud computing, Artificial Intelligence (AI), cyber security, big data, machine learning, and Augmented Reality and Virtual Reality (AR/VR), which fueled innovation in the business environment, will boost the growth and profitability of the tech industry.
The growing application of AI across multiple end-use verticals drives higher demand for automated and technologically advanced hardware and software products that enable AI. According to a report by Bloomberg Intelligence (BI), generative AI will become a $1.30 trillion market by 2032. This emerging industry represents a CAGR of 42% over the next ten years.
Considering these favorable trends, let’s look at the fundamentals of the best two Technologies Equities ETFs, beginning with number 2.
ETF #2: ARK Innovation ETF (ARKK)
ARKK is the flagship actively managed fund from the team at ARK Invest, an advisory firm led by Catherine Wood. It seeks long-term capital growth from companies globally involved with or benefitting from developing new products or services, technological improvements, and advancements in scientific research relating to DNA technologies, automation, AI, and fintech innovation.
ARKK has assets under management (AUM) of $7.91 billion. The fund’s top holdings include Coinbase Global, Inc. Class A (COIN) with a 10.87% weighting, followed by Roku, Inc. Class A (ROKU) at 9.20%, and Tesla, Inc. (TSLA) and Zoom Video Communications, Inc. Class A (ZM) at 7.88% and 6.86% weightings, respectively.
The fund has a total of 34 holdings, with its top 10 assets comprising 63.97% of its AUM. ARKK’s expense ratio is 0.75%, lower than the category average of 0.49%. Over the past month, ARKK fund flows were $211.31 million.
ARKK has gained 37% over the past month and 19.4% over the six months to close the last trading session at $46.70. In addition, it has climbed 49.5% year-to-date. It has a beta of 1.64. The ETF’s NAV was $46.68 as of November 28, 2023.
ARKK’s sound fundamentals are reflected in its POWR Ratings. 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 #59 of the 119 ETFs.
Click here to see additional ARKK’s POWR Ratings (Peer).
ETF #1: ROBO Global Artificial Intelligence ETF (THNQ)
THNQ invests in global companies that are leading the AI revolution. The ETF includes companies that develop the technology and infrastructure enabling AI like computing, data, and cloud services. It also includes firms that apply AI in several verticals, from business processes to e-commerce and healthcare, among others.
The fund tracks the ROBO Global® Artificial Intelligence Index. With $107.90 million in AUM, THNQ’s top holdings are Alteryx, Inc. Class A (AYX) with a 2.62% weighting, Splunk Inc. (SPLK) at 2.59%, and Microsoft Corporation (MSFT) and CrowdStrike Holdings, Inc. Class A (CRWD) at 2.40% and 2.35%, respectively.
THNQ has a total of 65 holdings, with its top 15 assets comprising 32.71% of its AUM.
The fund has an expense ratio of 0.68% compared to the category average of 0.57%. THNQ fund flows were $21.91 million over the past month and $47.72 million over the past three months. Also, over the past six months, the fund flows came in at $71.26 million.
THNQ has gained 18.6% over the past month and 41.9% over the past year to close the last trading session at $37.92. Moreover, the fund has surged 44.2% year-to-date. It has a beta of 1.21. The fund’s NAV was $37.80 as of November 28, 2023.
THNQ’s POWR Ratings reflect its solid prospects. 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. Also, it has a B grade for Peer. Of the 119 ETFs in the Technology Equities ETFs group, THNQ is ranked #42.
Click here to see all the THNQ ratings.
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ARKK shares rose $0.60 (+1.28%) in premarket trading Wednesday. Year-to-date, ARKK has gained 50.73%, versus a 20.28% 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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