5 Technology ETFs to Buy on a Rebound in PC Sales
After a prolonged downturn, the personal computer (PC) market witnessed a modest recovery in the fourth quarter of 2023. Worldwide shipments rose 0.3% year over year to 63.3 million units in the fourth quarter, marking the first annual growth after eight straight quarters of decline, according to Gartner.
Most analysts project the solid trend to continue in 2024, given the innovation through on-device AI capabilities in PCs. The resurgence in PC demand will benefit not just PC manufacturers but also chipmakers, memory producers and other component suppliers. As such, investors should tap the opportune moment with the technology ETFs, which have a solid Zacks Rank #1 (Strong Buy) or 2 (Buy), suggesting their continued outperformance (see: all the Technology ETFs here).
These include Technology Select Sector SPDR Fund XLK, Vanguard Information Technology ETF VGT, iShares U.S. Technology ETF IYW, MSCI Information Technology Index ETF FTEC and First Trust Technology AlphaDEX Fund FXL.
Acer led the way higher with 11.1% year-over-year growth. Apple AAPL also recorded strong growth of 7.2%, followed by 5.6% for HP HPQ and 3.2% for Lenovo. HP maintained the top spot in the U.S. PC market with 27.7% market share. Dell followed with 22.6% of U.S. market share.
The recovery was driven by a balance of demand and supply. Inventory issues, which had plagued the industry for two years, were resolved in the fourth quarter. Gartner projects the PC market to return to annual growth in 2024 with artificial intelligence (AI)-capable PCs and a rebound in demand.
The concept of AI PCs, defined as computers equipped with neural processors or capable of running AI programs efficiently, is the next growth opportunity for the PC market. PC manufacturers and chipmakers like Microsoft MSFT and Nvidia NVDA are at the forefront of this development. Meanwhile, laptops and desktops purchased at the onset of the pandemic in 2020 are aging, leading to renewed demand (read: Microsoft & Apple in Tug-Of-War: ETFs in Focus).
Despite the recent uptick, the industry experienced a significant decline in 2023. Total shipments for the year were 241.8 million PCs, reflecting a 14.8% year-over-year decrease. This was the first time since 2006 that shipments fell below 250 million units.
Canalys revealed a 3% year-over-year increase in PC shipments to 65.3 million units in the fourth quarter. Shipments of notebooks hit 51.6 million units, up 4% year over year, while desktop shipments were 13.7 million units, down 1%. Overall, PC shipments dropped 13% from the last year to 247 million units in 2023.
Technology Select Sector SPDR Fund (XLK)
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 64 securities in its basket, with key holdings in software, semiconductors & semiconductor equipment, and technology hardware, storage & peripherals. Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with AUM of $57.1 billion and an average daily volume of 6.8 million shares. The fund charges 10 bps in fees per year and has a Zacks ETF Rank #1 (read: 5 Sector ETFs to Bet on Ahead of Q4 Earnings).
Vanguard Information Technology ETF (VGT)
With AUM of $58 billion, Vanguard Information Technology ETF provides exposure to 315 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Systems software, technology hardware storage & peripheral, semiconductors and application software are the top four sectors. Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 471,000 shares. It has a Zacks ETF Rank #1.
iShares U.S. Technology ETF (IYW)
iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 133 U.S. electronics, computer software and hardware, and informational technology companies. Software & services, semiconductors & semiconductor equipment, tech hardware & equipment, and media & entertainment are the top four sectors with double-digit exposure each. iShares Dow Jones US Technology ETF has AUM of $14 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges 658,000 shares a day. IYW has a Zacks ETF Rank #1 (read: 5 Tech ETFs that Crushed the Magnificent Seven ETFs in 2023).
MSCI Information Technology Index ETF (FTEC)
MSCI Information Technology Index ETF is home to 303 technology stocks with an AUM of $8.1 billion. It follows the MSCI USA IMI Information Technology Index and has key holdings in software, technology hardware storage & peripherals, and semiconductors & semiconductor equipment. MSCI Information Technology Index ETF has an expense ratio of 0.08%, while volume is solid at 227,000 shares a day. It has a Zacks ETF Rank #1.
First Trust Technology AlphaDEX Fund (FXL)
With AUM of $1.3 billion, First Trust Technology AlphaDEX Fund offers exposure to the broad technology sector by using the AlphaDEX stock selection methodology. It follows the StrataQuant Technology Index and holds 97 securities in its basket, with software and computer science accounting for 73.8% share while the rest goes to technology hardware and equipment. First Trust Technology AlphaDEX Fund trades in a good average daily volume of 53,000 shares and charges 62 bps in fees per year. It has a Zacks ETF Rank #1.
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Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
HP Inc. (HPQ) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
First Trust Technology AlphaDEX ETF (FXL): ETF Research Reports
Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
