The Vanguard Information Technology ETF (VGT) gives investors broad exposure to the US information technology sector, an industry that drives innovation and economic growth. It encompasses industries such as software, hardware, semiconductors, and IT services.
Launched in January 2004, VGT aims to track the performance of the MSCI US Investable Market Information Technology 25/50 Index, which includes some of the largest and most innovative tech companies globally.
Technology is a key driver of economic growth and innovation, as we have seen with advancements and technologies such as artificial intelligence, cloud computing, cybersecurity, and more. VGT offers investors access to a wide range of tech leaders, including Apple, Microsoft, and Nvidia, making it an appealing choice for those seeking exposure to the tech sector's growth.
As of October 31, 2024, the Vanguard Information Technology ETF's total net assets were $90.50 billion.
Vanguard Information Technology ETF (VGT) Price and Chart
As you might expect, analysts remain optimistic about the technology sector, citing sustained demand for digital transformation and innovation, especially given the rise of artificial intelligence:
Bull Argument: The ongoing adoption of AI, cloud computing, and 5G technologies continues to drive growth in the tech sector, with the stocks of various high-profile names in the magnificent 7 making solid gains so far this year.
In September, Goldman Sachs managing director Kash Rangan, at the Goldman Sachs 2024 Communication and Technology Conference, said he thinks generative AI will be a long-term theme for the tech sector, stating that he is “very bullish how it unfolds eventually in the long term.” He added that innovation has to happen to get the industry back from an 11% growth rate to 20%-30% and that within the artificial intelligence sector, companies need to deliver in areas such as upselling customers and monetisation.
Bear Argument: While they are usually extremely bullish on tech, analysts at Wedbush said before the recent US election that a Trump win was “net negative for big tech,” highlighting the impact of Trump's policies on tariffs and a potential US-China tech conflict. Meanwhile, analysts at BTIG recently stated that the tech sector has “clearly lost momentum and relative strength in both cap-weighted and equally-weighted terms,” noting that semiconductors remain the weakest link.
Our View: The Vanguard Information Technology ETF offers a well-diversified and cost-efficient way to gain exposure to the high-growth tech sector. While near-term risks such as valuation concerns and market volatility exist, VGT's strong track record and holdings of industry leaders make it a compelling choice for long-term investors.
Vanguard Information Technology ETF Performance
| Year | Performance |
|---|---|
| 2024 (YTD) | +28.10% |
| 2023 | +52.65% |
| 2022 | -29.70% |
| 2021 | +30.45% |
| 2020 | +46.00% |
VGT Top Holdings (as of November 27, 2024)
| Company | % of Fund |
|---|---|
| Apple | 15.76% |
| Nvidia | 15.40% |
| Microsoft | 13.35% |
| Broadcom | 4.55% |
| Salesforce | 1.84% |
| Oracle | 1.81% |
| AMD | 1.52% |
| Cisco Systems | 1.45% |
| Adobe | 1.41% |
| Accenture | 1.41% |
Who Should Buy the Vanguard Information Technology ETF?
VGT is an appealing option for growth-focused investors, as they will gain exposure to innovative technology companies, while it is also attractive to investors looking to capitalise on the digital transformation of industries.
Investors who want a low-cost, diversified way to invest in US technology stocks may want to take a look at the ETF further. In addition, if you are bullish on a certain part of the information technology sector, such as AI or cloud computing, it may also be an ETF to assess further.
However, risk-averse investors may want to avoid the ETF, as the tech sector is prone to volatility, while income-focused investors may be in the same boat, as many tech companies reinvest profits rather than pay high dividends.
