These two tech-heavy ETFs have a history of outperformance.
Technology stocks have recently come under pressure following a strong start to the year, hurt by the pullback in shares of Nvidia. The chip giant has helped lead the market charge higher in the past few years, as its chips have become the backbone of the artificial intelligence (AI) infrastructure buildout.
With investors now taking some profits in both Nvidia and the tech sector as a whole, this is a great time to buy some tech-heavy exchange-traded funds (ETFs). Let’s look at two great options.
Invesco QQQ ETF
The first great ETF option to consider is the Invesco QQQ ETF (QQQ -2.68%). The ETF looks to mimic the performance of the tech-heavy Nasdaq-100 index, which comprises the 100 largest stocks that trade on the Nasdaq Stock Exchange.
About half of the ETF’s portfolio is made up of stocks from the Information Technology sector, with another 15% from the related Communication Services sector. Its top information technology holdings include Apple at 9.2% of its portfolio, Microsoft at 8.2%, Nvidia at 7.2%, and Broadcom at 4.9%, as of Sept. 3.
On the Communication Services side, Alphabet represents 4.9% of its holdings, followed by Meta Platforms at 4.8%. Amazon, meanwhile, is classified as a Consumer Discretionary stock, as is Tesla. They account for 4.9% and 2.7% of the ETF’s holdings, respectively.
As you can see, investors are getting a lot of exposure to the top tech companies in the world through the Invesco QQQ ETF. These are also the companies best positioned to continue to benefit from AI.
Given the important ways these technology leaders have helped shape the world we live in, it is perhaps no surprise that the ETF has been a huge winner over the years. Over the past decade, the ETF has generated a 418% return as of the end of August, while over the past five years, it has garnered a nearly 163% return.
With the ETF off its earlier highs, now is a great time to add it to your portfolio.
Image source: Getty Images.
Vanguard Information Technology ETF
Another great technology-focused ETF to buy right now is the Vanguard Information Technology ETF (VGT -2.40%). This ETF tracks the performance of the MSCI U.S. Investable Market Information Technology 25/50 index.
Similar to the QQQ ETF, the Vanguard Information Technology Index has been a strong performer over the years. In fact, it’s been an even better performer over both the past five and 10 years. The ETF has a cumulative return of nearly 181% in the past five years and over a 532% return the last 10 years as of the end of August.
The ETF consists of only tech stocks and is very heavily weighted toward its top three holdings. Apple is its largest holding, representing 17.2% of its portfolio, followed by Microsoft at 15.8% and Nvidia at 14.1%. There is then a big drop, with Broadcom in its fourth-largest position at 4.8%.
Combined, its top four holdings make up half its portfolio. As such, how those stocks perform will have a large influence on the ETF’s performance as well.
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 got to the size they are for a reason, and that is their operational and stock performances.
Just like the S&P 500 index and the Nasdaq-100, the MSCI index that the Information Technology ETF is based on is a market-cap-weighted index, so these stocks have earned their index weightings through their performances.
So, for investors who want to bet even more heavily on the largest technology companies in the world, this is a great time to buy the Vanguard Information Technology ETF. It is well off its high of $609.15 that it hit on July 15, which means investors can scoop up this strong-performing ETF at about 10% below where it was trading less than two months ago.
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, a former director of market development and spokeswoman for Facebook and sister to 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.
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