Wall Street has been on a remarkable rally, buoyed by a surge in technology stocks. The artificial intelligence (AI) craze, hopes of rate cuts and the rising share of the "Magnificent Seven" have been driving the space.

Most of the gains were driven by five “mega-cap” tech companies — NVIDIA (NVDA), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META) and Apple (AAPL). NVIDIA alone accounted for 31% of the market’s first-half advance. NVIDIA, Apple and Microsoft are in a race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities (read: ETFs to Tap as NVIDIA Becomes the Most Valuable Company).

While many ETFs have powered the sector in the first half, we have highlighted five from different industries that led the way higher. These are VanEck Vectors Semiconductor ETF (SMH Quick QuoteSMH - Free Report) , First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT Quick QuoteCRPT - Free Report) , Roundhill Magnificent Seven ETF (MAGS Quick QuoteMAGS - Free Report) , AXS Esoterica NextG Economy ETF (WUGI Quick QuoteWUGI - Free Report) and Clockwise Core Equity & Innovation ETF (TIME Quick QuoteTIME - Free Report) .

Solid Sector Growth Trends

The AI boom will continue to fuel the rally in the sector, with companies investing huge sums in this technology. The expansion of AI applications holds the promise of ushering in fresh opportunities for growth within the sector (read: 4 ETFs to Tap the Emergence of Disruptive Technology).

In its latest meeting, the Fed penciled in one rate cut for this year and projected four cuts in 2025. The central bank has altered the language in its statement, noting that there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress. This signals a period of higher interest rates for a while. Tech titans have shown strong resilience in such a scenario. And, when the Fed starts cutting rates later this year, technology stocks will receive a boost. As the tech sector relies on borrowing for superior growth, borrowing more money for further initiatives is cheaper when interest rates are low.

Further, cutting-edge technologies, including 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 drive the sector. Meanwhile, worldwide IT spending is expected to increase 8% year over year to $5.06 trillion this year, according to the latest forecast by Gartner. This will put worldwide IT spending on track to surpass $8 trillion well before the end of the decade. Higher spending across software, data center systems, IT services and semiconductors will provide another boost to the sector.

Moreover, tech titans have strong balance sheets, durable revenue streams and robust profit margins, making them attractive investments. They are better positioned to withstand a possible economic downturn and have demonstrated improved cost discipline.

ETFs to Buy

VanEck Vectors Semiconductor ETF (SMH Quick QuoteSMH - Free Report) – Up 48%

VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket (read: Top and Flop ETFs of the First Half).  

VanEck Vectors Semiconductor ETF has managed assets worth $23.3 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 7 million shares per day and has a Zacks ETF Rank #1 (Strong Buy), with a High risk outlook.
    
First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT Quick QuoteCRPT - Free Report) – Up 41.6%

First Trust SkyBridge Crypto Industry and Digital Economy ETF is designed to provide exposure to companies that SkyBridge believes are driving cryptocurrency, crypto assets and digital economy-related innovation. SkyBridge identifies securities primarily via “bottom-up” research focused on finding companies leading in the crypto industry ecosystem.

First Trust SkyBridge Crypto Industry & Digital Economy ETF holds 30 stocks in its basket and charges 85 bps in fees per year from investors. It has amassed $58.1 million in its asset base and trades in an average daily volume of 67,000 shares.

Roundhill Magnificent Seven ETF (MAGS Quick QuoteMAGS - Free Report) – Up 36.9%

Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. It has amassed $478.6 million in its asset base and charges 29 bps in fees per year. MAGS trades in an average daily volume of 200,000 shares (read: 5 Sector ETFs That Beat the Market in Q2).

AXS Esoterica NextG Economy ETF (WUGI Quick QuoteWUGI - Free Report) – Up 35.7%

AXS Esoterica NextG Economy ETF is an actively managed ETF that invests in stocks of companies that benefit from the ever-evolving digital economy. It holds 31 stocks in the basket.

AXS Esoterica NextG Economy ETF has accumulated $33.2 million in its asset base and charges 75 bps in fees per year. It trades in a volume of 4,000 shares a day on average (read: NVIDIA ETFs Seesaw Last Week: What's in Store?).

Clockwise Core Equity & Innovation ETF (TIME Quick QuoteTIME - Free Report) - Up 29.9%

Clockwise Core Equity & Innovation ETF is a cutting-edge fund designed for investors seeking exposure to long-term core growth opportunities balanced with emerging technologies that are shaping the future. It holds 34 stocks in its basket.

Clockwise Core Equity & Innovation ETF has gathered $23 million in its asset base and charges 95 bps in fees per year from investors. It trades in an average daily volume of 8,000 shares.