The tech sector and artificial intelligence (AI) stocks have helped lead the market higher over the past several years. That run continued into this year, but more recently, the sector has come under some pressure. Bears believe there is a potential AI bubble that could burst, given the high spending on AI infrastructure.
However, that spending as a percentage of gross domestic product is not out of line compared to past transformational cycles, and it still has room to grow. Bears will also point to the market for initial public offerings (IPOs), which is heating up with Space Exploration Technologies’ debut and the likelihood that OpenAI and Anthropic will soon follow SpaceX. They hearken back to the internet bubble.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
But right now there are a few big companies in the IPO conversation, not a rush of smaller dot-com companies as we saw during the bubble, where their stock prices would often skyrocket out of the gate.
At the same time, many tech stock multiples are not only reasonable, but they are also downright cheap. Take Nvidia, for example. It is trading at a forward price-to-earnings ratio (P/E) below 16 times fiscal 2028 analyst estimates — for a market-leading company that just grew its quarterly revenue by 85%. Microsoft, meanwhile, trades at a forward P/E of only 19 times its fiscal 2027 consensus earnings. These are great growth stocks riding the AI wave that are trading at very cheap valuations.
A great tech ETF to buy
They are also two of the top three holdings, along with Apple, in the Vanguard Information Technology ETF (NYSEMKT: VGT). Together, the three stocks make up 42% of the exchange-traded fund’s portfolio. That’s not a bad trio to have as a core part of your portfolio.
Nvidia is the king of AI infrastructure, while Apple has one of the best compounding business models. And Microsoft is deeply ingrained in the enterprise software space and has a fast-growing cloud unit. It also owns a 27% share in OpenAI.
This core base of holdings is why the Vanguard Information Technology ETF is a good tech ETF to invest in. Other top-10 holdings include Broadcom, Micron Technology, Advanced Micro Devices, Intel, Cisco Systems, Lam Research, and Oracle, all of which are riding the AI infrastructure boom. The fund holds over 300 stocks and tracks the MSCI US Investable Market Information Technology 25/50 Index, but it is these 10 holdings that are going to do the heavy lifting.
-1024x683.jpg "Strait Outta Hormuz: Getting the Iran Oil Story Straight")
