The resurgence of the technology sector in 2023 has been fueled by a combination of compelling growth prospects in AI and increasingly favourable economic conditions globally. Both factors have led to significant new investments in tech companies that leverage cutting-edge technologies and offer investors high-growth potential and innovation-driven prospects.

And since the NASDAQ® has long been synonymous with “Big Tech,” it is no surprise that the NASDAQ® has so far had a remarkable 2023.

But it may surprise investors to learn that both the broader NASDAQ® and the NASDAQ-100®— an index focused on the largest non-financial companies listed on the NASDAQ® exchange—aren’t that heavily focused on the technology sector.

So why then is the NASDAQ-100® doing so well in 2023? And is there a better solution than the NASDAQ-100® for investors looking for a way to focus their investment on a pure tech play?

It’s because of the outsized role tech companies within the NASDAQ-100® play in the index’s overall returns.

Tech Makes a Comeback in 2023

If you look exclusively at the Technology stocks within the NASDAQ-100® you find that they have contributed an incredible 76.2% of the index’s overall performance in the first half of 2023. Of the top ten companies in the NASDAQ-100®, six—Alphabet, Apple, Broadcom, Meta, Microsoft, and NVIDIA—are in the Technology sector, while two others—Amazon and Tesla—are related in the Consumer Discretionary sector.³

In fact, the Technology sector has consistently outperformed the broader NASDAQ-100® index over the past decade and has propelled most of the index’s returns during that time. It will come as no surprise, then, that as of June 30, 2023, the NASDAQ-100®’s Technology sector exposure, based on ICB Industry classifications, is at a recent high of 61.5%.⁴

That’s because the big story in the technology sector and why it is booming in 2023 has been the growing prominence of AI, as well as moderating inflation and a perceived end to rate hikes.⁵

AI technologies’ enormous potential for revolutionizing various industries and reshaping business models by enhancing efficiency, productivity, and profitability has meant substantial new investment in tech companies leveraging these cutting-edge technologies.

At the same time, decreasing inflation and a perception that the era of rate hikes is nearing its end has meant a renewed interest in growth-oriented investments, with technology companies offering high-growth potential and innovation-driven prospects being particularly sought after.

Many of the Technology sector companies within the NASDAQ-100® are at the forefront of AI development, focused on developing hardware for data-intensive computations, providing cloud infrastructure platforms, and developing cutting-edge AI interface software. As a result, they have been instrumental in driving the technology sector’s resurgence and significantly contributing to the NASDAQ-100®’s overall performance in 2023.

A Pure Tech Play with NDXT10

So if the technology stocks within the NASDAQ-100® are yielding most of the index’s returns, is there a way to access just on the performance of that subset of stocks as an investor?

The NASDAQ-100® Technology Sector Adjusted Market-Cap Weighted™ Index (NDXT10) offers investors a means of further drilling down to track only those elements of the NASDAQ-100® that are pure Technology companies. And, when you do so, the strong performance of the NDXT10 becomes clear.

The NASDAQ-100® Technology Sector Adjusted Market-Cap Weighted™ Index (NDXT10)

Adobe Incorporated Advanced Micro Devices, Inc. Alphabet Inc. Analog Devices, Inc. ANSYS, Inc. Apple Inc. Applied Materials, Inc. ASML Holding N.V. Atlassian Corporation (Class A) Autodesk, Inc. Broadcom Inc. Cadence Design Systems, Inc. Cognizant Technology Solutions Corporation CrowdStrike Holdings, Inc. (Class A) Datadog, Inc. (Class A) Fortinet, Inc. GLOBALFOUNDRIES Inc. Intel Corporation Intuit Inc.

KLA Corporation Lam Research Corporation Marvell Technology, Inc. Meta Platforms Inc. (Class A) Microchip Technology Incorporated Micron Technology, Inc. Microsoft Corporation NVIDIA Corporation NXP Semiconductors N.V. ON Semiconductor Corporation Palo Alto Networks, Inc. PDD Holdings Inc. (ADR) QUALCOMM Incorporated Synopsys, Inc. Texas Instruments Incorporated Workday, Inc. (Class A) Zoom Video Communications, Inc. (Class A) Zscaler, Inc.

* Current as of July 27, 2023

 

The NDXT10 outperformed the NASDAQ-100® by 18.7% (57.5% to 38.8%) on a price return basis in the first half of 2023. It also topped the S&P 500 Information Technology Sector Index (S5INFT) by 15.4% (57.5% to 42.1%) and outpaced the S&P 500 (SPX) as a whole, which was up only 15.9%.⁶ And over the last fove years, the NDXT10 has outperformed the NASDAQ-100® by 21.9% (147.4% to 125.5%).⁷

And, as the AI-driven boom continues to reshape the tech industry, the tech companies in the NDXT10 will remain at the forefront of innovation, driving substantial gains in the stock market.

AI’s Impact on NDXT10 Companies

Among the companies listed in the NDXT10 index, tech giants like NVIDIA, Microsoft, Alphabet, and Meta have been at the forefront of leveraging AI’s potential.

Since the debut of ChatGPT in late 2022, Microsoft and Google have integrated AI functionality into core products such as Microsoft Word and Google Search. As one sign of just how important AI has become in such short a time, Google CEO Sundar Pichai mentioned “AI” 34 times in a recent earnings call, up from just five times a year earlier.⁸

Google’s experimental AI chat service, Bard, operates similarly to ChatGPT but with a key difference—it retrieves information from the web, including images. Bard, like other AI chatbots, can handle coding, math problems, and writing assistance. Recently, it received a significant upgrade, now powered by Google’s advanced large language model, PaLM 2, unveiled at the Google I/O 2023 conference. With this transition, Bard has become more efficient and capable, surpassing its earlier version backed by LaMDA.⁹

Meta, Amazon, and Apple have also made strides in incorporating AI into their technology in the first half of 2023.

Apple, for example, is working on what some developers have nicknamed “Apple GPT,” an AI chatbot meant to rival OpenAI, Alphabet, and Google’s AI offerings.¹⁰ Based on Apple’s own LLM foundation, Ajax, the company so far has no release strategy for its chatbot, but reports suggest that Apple employees already have internal access to the tool and are using it for quick text summaries, queries, and product prototyping.¹¹

But to date, the biggest AI gold rush winner must be chip manufacturer Nvidia. The company’s processors, initially meant for video games, are instrumental in training AI algorithms, and Nvidia now offers specialized products and software for AI training and processing support. Nvidia announced that it expected to sell $11 billion worth of chips in Q2, beating analyst predictions by $4 billion.¹² This announcement sent their stock surging 24% to a market valuation of $1 trillion, and their stock up over 182% so far this year due to demand for its AI tools.¹³

Other NDXT10 companies like Adobe and Apple have also embraced AI, integrating the technology into their products and services. Adobe has incorporated generative AI into its image and video editing software, while Apple has leveraged AI across its range of devices, including smartphones, tablets, and wearable gadgets.¹⁴

As AI continues to drive innovation, NDXT10 companies (which are focused on transformative technology) are well-positioned to thrive in the evolving market landscape. The convergence of AI and technology stocks’ resurgence has positioned the NDXT10 as a focal point for investors seeking exposure to the forefront of technological innovation.

Canada’s First NASDAQ-100® Technology-Focused ETF with QQQT ETF

Looking for ways to take advantage of a pure tech play within the NASDAQ-100®?

QQQT is Canada’s first NASDAQ-100® technology-focused ETF designed to provide investors with exposure to only the “technology company” elements of the NASDAQ-100 Index®.

The new ETF comes in three versions: Canadian dollar hedged Units (QQQT), Canadian dollar unhedged units (QQQT.B) and U.S. dollar unhedged units (QQQT.U).

To learn more about the Evolve NASDAQ Technology Index Fund, please click here: https://evolveetfs.com/qqqt/.

Sources:

1. Treece, D., “What is NASDAQ?,” Business News Daily, February 21, 2023; https://www.businessnewsdaily.com/3403-nasdaq.html
2. Bajpai, P., “What is the Nasdaq Composite, and What Companies are in It?,” Nasdaq.com, May 21, 2021; https://www.nasdaq.com/articles/what-is-the-nasdaq-composite-and-what-companies-are-in-it-2021-05-12
3. Marex, M., “NDXT10™ Index: Accessing the Pure Tech Sector Exposure of the Nasdaq-100®,” Nasdaq, n.d., https://evolveetfs.com/wp-content/uploads/2023/07/NDXT10-Research.pdf
4. Ibid
5. “Evolve Launches Canadian ETF Tracking Nasdaq Technology Index,” Nasdaq, July 12, 2023; https://www.nasdaq.com/articles/evolve-nasdaq-tech-index-qqqt
6. Marex, M., “NDXT10™ Index: Accessing the Pure Tech Sector Exposure of the Nasdaq-100®,” Nasdaq, n.d., https://evolveetfs.com/wp-content/uploads/2023/07/NDXT10-Research.pdf
7. Ibid
8. De Vynck, G., “The tech industry was deflating. Then came ChatGPT.” The Washington Post, June 4, 2023; https://www.washingtonpost.com/technology/2023/06/04/ai-bubble-tech-industry-outlook/
9. Ortiz, S., “What is Google Bard? Here’s everything you need to know,” ZDNET, June 1, 2023; https://www.zdnet.com/article/aws-hones-in-on-generative-ai-at-summit-and-unveils-new-ai-projects-here-are-the-highlights/
10. “Apple’s new AI project: What to expect in the future from ‘Apple GTP,’” HT Tech, July 24, 2023; https://tech.hindustantimes.com/tech/news/apples-new-ai-project-what-to-expect-in-the-future-from-apple-gpt-71690168298155.html
11. Gurman, M., “Apple Tests ‘Apple GPT,’ Develops Generative AI Tools to Catch OpenAI,” Bloomberg, July 19, 2023; https://www.bloomberg.com/news/articles/2023-07-19/apple-preps-ajax-generative-ai-apple-gpt-to-rival-openai-and-google
12. De Vynck, G., “The tech industry was deflating. Then came ChatGPT.” The Washington Post, June 4, 2023; https://www.washingtonpost.com/technology/2023/06/04/ai-bubble-tech-industry-outlook/
13. Mozée, C., “Nvidia achieves $1 trillion market cap for the first time as AI-fueled stock surge continues,” Markets Insider, May 30, 2023; https://markets.businessinsider.com/news/stocks/nvidia-stock-price-ai-artificial-intelligence-trillion-valuation-chipmaker-gpus-2023-5
14. Marex, M., “NDXT10™ Index: Accessing the Pure Tech Sector Exposure of the Nasdaq-100®,” Nasdaq, n.d., https://evolveetfs.com/wp-content/uploads/2023/07/NDXT10-Research.pdf

 

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