Investor money is flooding into tech stocks in 2019 as the sector regains its position as a market leader. After plunging last year, the tech sector has gained over $1 trillion back in market capitalization over the first four months of this year through last week. Also noteworthy is the sector has ended in the red only one week out of 17 this year, despite historically high valuations, per a detailed story in Bloomberg.

Three high-flying tech ETFs have benefitted hugely, as illustrated in their rich year-to-date gains below.

3 High-Flying Tech ETFs

(YTD Performance)

  • Invesco QQQ Trust Series 1 + 24.1%
  • Technology Select Sector SPDR Fund + 28.9%
  • Vanguard Information Technology ETF + 29.7%

Source: Investopedia

'White Hot' Techs

“Tech flows are white hot,” wrote Jefferies strategist Steven DeSanctis in a recent note to clients. While U.S. equities saw $6 billion in net outflows in the week ended April 26, tech stocks had more than $1.3 billion in net inflows, per EPFR Global data cited by Bank of America Merrill Lynch. ETFs attracting major interest are the Invesco QQQ Trust Series 1 (QQQ), which tracks the Nasdaq 1000, the Technology Select Sector SPDR fund (XLK), and the Vanguard Information Technology ETF (VGT).

Apple Earnings Adds to Tech Rally

The rally in tech coincides with earnings season for America’s tech giants. While weaker than expected results for Alphabet Inc. (GOOGL) sent the stock tumbling, the miss has had little impact on the techs or the broader market. Also, those results have been overshadowed by a Apple Inc. (AAPL), which beat both earnings and revenue estimates in its report after the bell on Tuesday. Its shares were up as much as 7% on daily trading on Wednesday.

Apple and Microsoft Corp. (MSFT) collectively make up about 30% of the Vanguard Information Technology ETF, which overtook State Street Corp.’s XLK as the most popular tech ETF earlier this year. The $21 billion fund saw its biggest weekly inflow ever in April thanks in part to a massive trade that funneled more than $400 million into the ETF on April 23.

Looking Ahead

Not everyone thinks the tech rally can last given the weak fundamentals in the broader market. Morgan Stanley’s Mike Wilson is holding on to one of the most bearish forecasts on the Street, as reported by Bloomberg. He is one of the skeptics who argues that underlying fundamentals do not support the rally, reiterating an S&P 500 year-end target of 2,750, nearly 7% below current levels.