The tech rally has resumed after a rocky start to September, which is known as one of the worst months for stocks. However, tech stocks appear to be defying the tradition as the Federal Reserve gears up to end its monetary tightening campaign.

Tech stocks have been responsible for the broader market rally that started last year. Besides a few hiccups, the tech sector has been one of the best performers this year. It would thus be a prudent choice to invest in technology funds like Fidelity Select Semiconductors Portfolio (FSELX Quick QuoteFSELX - Free Report) , Janus Henderson Global Technology and Innovation Fund (JNGTX Quick QuoteJNGTX - Free Report) and DWS Science and Technology A (KTCAX Quick QuoteKTCAX - Free Report) for near-term gains.

Tech Stocks Boost S&P 500, Nasdaq Rally

A weaker-than-expected August jobs report and a marginal increase in the monthly inflation unsettled markets earlier this month, leading to a massive selloff. However, investors have since reassessed the situation and rushed to buy tech stocks.

On Friday, both the S&P 500 and Nasdaq logged their fifth consecutive session of gains as investors snapped up mega-cap tech and semiconductor stocks. The S&P rose by 0.5%, closing at 5,626.02 points, leaving it less than 1% away from its record high set in July. The Nasdaq climbed 0.7% to finish at 17,638.98 points. Year-to-date, the S&P 500 and Nasdaq have risen by 18.6% and 19.8%, respectively.

Fresh inflation data showed a modest 0.2% rise in the Consumer Price Index (CPI) in August. However, the big takeaway from the report was that the inflation rate dropped to its lowest level since February 2021.

A key factor driving this year’s tech rally is the excitement around artificial intelligence (AI), particularly generative AI. Experts believe AI holds vast untapped potential, and NVIDIA Corporation’s (NVDA) remarkable success over the past year has motivated numerous tech companies to delve into AI's possibilities to gain long-term business advantages.

Fed Rate Cut to Boost Tech Stocks

Some market participants were hopeful about a 50-basis point rate cut by the Fed in September. However, that is unlikely now after the inflation report but a 25-basis point interest rate cut is almost certain this week following the Federal Reserve’s FOMC meeting.

Any rate cut, regardless of size, bodes well for the overall economy. Lower interest rates typically boost growth assets by reducing the opportunity cost of holding non-yielding assets like technology and semiconductor stocks.

3 Best Choices

As a result, we've chosen three funds from the tech sector that are worth buying. These funds have given impressive 3-year and 5-year annualized returns, boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), offer a minimum initial investment within $5,000 and carry a low expense ratio.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Semiconductors Portfolio fund seeks capital appreciation. FSELX normally invests at least 80% of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards and other components); equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Fidelity Select Semiconductors Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSELX’s returns over the three and five-year benchmarks are 26.1% and 36.3%, respectively. FSELX has a Zacks Mutual Fund Rank #1 and its annual expense ratio is lower than the category average.

To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.

Janus Henderson Global Technology and Innovation Fund aims for long-term growth of capital and specializes in technology. JNGTX invests the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.

Janus Henderson Global Technology and Innovation Fund has a track of positive total returns for over 10 years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 6.7% and 18.8%, respectively. JNGTX has a Zacks Mutual Fund Rank #2 its annual expense ratio is lower than the category average.

To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.

DWS Science and Technology A fund seeks growth of capital. Under normal circumstances, KTCAX invests at least 80% of net assets in common stocks of U.S. companies in the technology sector.

DWS Science and Technology A fund has a track of positive total returns for over 10 years. Specifically, KTCAX’s returns over the three and five-year benchmarks are 8.8% and 20.7%, respectively. DWS Science and Technology A fund has a Zacks Mutual Fund Rank #1 its annual expense ratio is lower than the category average.

To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.

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