Tech Set to Surge on Tariff Pause: 5 ETF Picks

Last week was historic for U.S. stocks, marked by dramatic market swings. Ultimately, the S&P 500 and Dow Jones posted their strongest weekly gains since October 2023, having risen 5.7% and 5%, respectively, while the Nasdaq Composite Index gained 7.3% — its best weekly performance since November 2022. The rally was driven by Trump’s tariff pause.

Mega-cap tech stocks led the rally, with NVIDIA NVDA surging more than 17% to record its best week since August, while Amazon AMZN rose more than 8%. Alphabet GOOGL, Microsoft MSFT and Meta Platforms all jumped nearly 8%. Tesla (TSLA), which had its best session since 2013, added more than 5%. Apple AAPL gained 5% last week and recorded its best day since 1998 on Wednesday (read: Apple Stock Suffers Sharp Selloff: Buy the Dip in ETFs?).

The rally is expected to continue, at least in the near term. Investors seeking to tap the potential rally should invest in tech ETFs, which have been beaten down badly over the past month due to tariff talks. These include Valkyrie Bitcoin Miners ETF WGMI, VanEck Vectors Digital Transformation ETF DAPP, SPDR S&P Semiconductor ETF XSD, ROBO Global Robotics & Automation Index ETF ROBO and Global X Internet of Things ETF SNSR.

Tariff Pause

Last Wednesday, President Donald Trump halted the "reciprocal" tariffs for 90 days. On Friday, the new administration exempted Apple products, including the iPhone from the additional 125% tariff on Chinese goods and 10% baseline levy on imports from other countries. Other smartphones, servers, memory chips, solar cells, flat panel TVs and many other tech goods that are often made in China are also exempted from the new tariff (read: 5 Leveraged ETFs That Skyrocketed on 90-Day Tariff Pause). 

The exemptions were made to ensure companies had more time to move production to the United States. The pause on duties on goods from smartphones to laptop computers and memory chips seems a temporary reprieve as Trump aims to reshape trade in the semiconductor industry. Trump announced on Sunday that he would reveal the tariff rate on imported semiconductors in the coming week, indicating flexibility for certain companies in the sector.

Strong Earnings Outlook

The tech sector continues to be a significant growth driver of the first-quarter earnings season. The sector’s earnings are expected to be up 12.5% from the same period last year on 10.2% higher revenues. This will mark the seventh consecutive quarter of double-digit earnings growth and follow the sector’s 26.4% earnings growth on 11.4% higher revenues in the fourth quarter of 2024. The double-digit earnings and revenue growth is expected to continue for the next two quarters, though it could slow down a bit.

Promising Tech Growth Outlook

Investors have lately ramped up the bets for aggressive interest rates this year as Trump's tariffs raise recession fears. Derivatives markets now imply a 44% chance that the Fed will cut rates at its next meeting on May 6-7. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.

The adoption of artificial intelligence (AI) technology, which has slowed down this year, will again provide a lift to the tech stocks. The expansion of AI applications holds the promise of ushering in fresh opportunities for growth within the sector.

The sector outlook remains solid. The global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping, thereby bolstering strength in the sector. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.

If these were not enough, the technology sector has a solid Zacks Sector Rank, being in the top 44%, which suggests continued outperformance in the coming months (read: 3 Tech ETFs on Sale Now).

Let us dig into the details of the above-mentioned ETFs.

Valkyrie Bitcoin Miners ETF (WGMI) – Down 26.4%

Valkyrie Bitcoin Miners ETF is an actively managed ETF that invests at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining. Valkyrie Bitcoin Miners ETF holds nine stocks in its basket, with a double-digit concentration on the top three firms. 

It has amassed $108.7 million in its asset base while trading in an average daily volume of 757,000 shares. WGMI charges 75 bps in annual fees.

VanEck Vectors Digital Transformation ETF (DAPP) – Down 24.4%

VanEck Vectors Digital Transformation ETF aims to offer exposure to companies that are at the forefront of digital asset transformation, such as digital asset exchanges, payment gateways, digital asset mining operations, software services, equipment and technology or services to the digital asset operations, digital asset infrastructure businesses or companies facilitating commerce with the use of digital assets. 

VanEck Vectors Digital Transformation ETF tracks the MVIS Global Digital Assets Equity Index and holds 23 securities in its basket. It charges 51 bps in annual fees and trades in an average daily volume of 336,000. DAPP has accumulated $136.6 million in its asset base.

SPDR S&P Semiconductor ETF (XSD) – Down 21.6%

SPDR S&P Semiconductor ETF offers exposure to the semiconductor segment of the broader technology sector and tracks the S&P Semiconductor Select Industry Index. It holds 41 stocks in its portfolio with each accounting for no more than 3.7% of assets. SPDR S&P Semiconductor ETF has AUM of $1 billion and an average daily volume of about 57,000 shares. It charges 35 bps in fees per year and has a Zacks ETF Rank #2 (Buy) (read: Semiconductors Leading Nasdaq's Bounce-Back: ETFs in Focus).

ROBO Global Robotics & Automation Index ETF (ROBO) – Down 18%

ROBO Global Robotics & Automation Index ETF invests in global companies that are driving transformative innovations in robotics, automation, and artificial intelligence (RAAI), including companies that create technology to enable truly intelligent systems that can sense, process, and act, and companies that apply those technologies to deliver RAAI-enabled products—including robots—to businesses and consumers. It holds 74 stocks in its basket, with none accounting for more than 2.1% share.

ROBO Global Robotics & Automation Index ETF has AUM of $829.4 million and trades in an average daily volume of 85,000 shares. It charges 95 bps in annual fees.

Global X Internet of Things ETF (SNSR) – Up 16.9%

Global X Internet of Things ETF seeks to invest in companies that stand to potentially benefit from the broader adoption of the Internet of Things (IoT), as enabled by technologies such as WiFi, 5G telecommunications infrastructure, and fiber optics. It follows the Indxx Global Internet of Things Thematic Index holds 55 stocks with each accounting for no more than 6.1% of assets.  

Global X Internet of Things ETF has accumulated $190.6 million in AUM and sees average daily volume of around 36,000 shares. Expense ratio comes in at 0.68%.

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This article originally published on Zacks Investment Research (zacks.com).

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