The Technology Select Sector SPDR Fund ETF (NYSERCA:XLK), which tracks the information technology sector of the S&P 500, gained 8.38% so far this quarter, outperforming the 4.56% rise in the broader S&P500 index.
The information technology sector, which includes stocks such as Nvidia (NVDA), First Solar (FSLR) and Apple (AAPL) led the pack among the S&P500 sectors with the highest growth in the second quarter.
The sector was the best performer in the S&P 500 index, up 8.38%, followed by Utilities (XLU) and Communications (XLC), which also outperformed the benchmark during the quarter.
Nvidia (NVDA) saw the biggest growth in the S&P 500 IT Index, rising nearly 36.73% during the quarter, leading among chipmakers in supplying the units needed for the AI boom.
First Solar (FSLR) came in a close second, up 33.57%, benefiting from the AI frenzy as demand for cheap energy surged. Sales and profits from its power panels rose well above analyst estimates in its previous quarter results.
Investors were excited when Nvidia and Apple posted results that beat Wall Street estimates, capitalizing on the artificial intelligence craze for data centers and servers. Apple also launched its $110 billion share buyback program, increasing its quarterly dividend to $0.25 per share.
Apple (AAPL) has gained 9.40% so far this year.
Performance of industries in the second quarter
The software and services sector increased 3.4% during the second quarter. Technology, hardware and equipment increased by 20.22% and semiconductors and semiconductor equipment increased by 21.31%.
The inflow and outflow of U.S. stock funds into the sector, while holding on average as a whole during the second quarter, rose and fell significantly during one week in June. The information technology sector-focused ETF (XLK) had a net outflow of $210.21 million as of June 27.
The 5 best results of the second quarter:
- Nvidia (NVDA) +36.73%
- First solar (FSLR) +33.57%
- Teradino (TER) +31.43%
- Apple (AAPL) +22.82%
- NetApp (NTAP) +22.70%
The 5 worst results of the second quarter:
- EPAM Systems (EPAM) -31.88%
- Intel (INTC) -29.88%
- Payment software (PAYC) -28.12%
- Global Payments (GPN) -27.65%
- Daytime strength (DAY) -25.09%
What do quantitative measures say?
XLK received a Strong Buy rating from Looking Alpha’s Quant Rating system, scoring 4.62 out of 5. The sector received an A+ for liquidity and momentum, an A for expenses, and a B for dividends. However, it received a C- for risk outlook.
What do analysts expect?
Three analysts surveyed by Seeking Alpha in the last 90 days recommended buying the sector, another three recommended holding, one recommended selling, and the remaining recommended selling hard.
Seeking Alpha analyst Komal Sarwar wrote that investing in technology ETFs could offer exposure to the tech sector while reducing the risks associated with single-stock investments.
However, another report by analyst Vladimir Dimitrov said that due to its weighting methodology, the ETF is extremely concentrated and NVDA is the only reason why XLK outperformed the broader tech sector.
“The extreme concentration within the ETF makes it less likely that it will continue to outperform more diversified alternatives,” he added.