ETFs targeting the tech sector saw significant inflows last month, even as concerns about overconcentration in the Magnificent 7 stocks continue to grow.
The iShares S&P 500 Information Technology Sector UCITS ETF (IUIT) saw inflows of $376 million last month, while the iShares MSCI Europe Information Technology Sector UCITS ETF (ESIT) saw inflows of $214 million. did.
The growing inflows into tech ETFs are in stark contrast to growing concerns about concentration risk associated with the rapid growth of the Magnificent 7 stocks, which now account for nearly a third of the S&P 500’s total market capitalization. .
This is evidenced in Morningstar’s European ETF Asset Flow Update, which highlighted that funds tracking the S&P 500 Equal Weight Index were among the top 10 in the U.S. large-cap blended stock category in the third quarter. .
José García Zarate, Morningstar’s associate director of passive strategies, said of the renewed interest in equal-weight strategies, “Some investors are seeing more tech stocks than traditional market-cap weighted benchmarks. This suggests that people are starting to be wary of the high concentration of
Despite these concerns, continued inflows into these products highlight continued investor confidence in tech sector ETFs.
“We believe this AI rally will continue,” said Andreas Bickel, chief investment officer and head of investment at Lienhard & Partner Privatbank Zurich.
Bickel went on to say that he believes there is a cautious sentiment and lack of investment in continental Europe, and that this could lead to a crash or spike in stock prices if investors start increasing their positions in tech stocks. Ta.
“We therefore argue that this rally will continue to grow, and is likely to gain momentum following the recent pause in the tech sector,” he said.
Bickel is the SPDR S&P US Technology Select Sector UCITS ETF (SXLK), iShares Nasdaq-100 UCITS ETF (CNDX), Invesco EQQQ Nasdaq-100 UCITS ETF (EQQQ), and VanEck Semiconductor UCITS ETF (SMH).
Alberto García Fuentes, head of asset allocation at ACCI Capital Investments, previously told ETF Stream that if valuations for tech companies become a bit “tougher,” the iShares S&P 500 Information Technology Sector UCITS ETF ( high-tech ETFs such as IUIT) and an equal-weighted strategy to avoid the risk of overconcentration.
IUIT has a strong bias toward Mag 7 stocks, with the top three weightings being Apple (22.2%), Nvidia (18.7%), and Microsoft (18.3%).
If an investor chooses an S&P 500 ETF, the strategy can include diversification with small-cap companies and defensive sectors such as healthcare to balance risk and capture growth.
