Bargain hunting drove investors to exchange-traded funds (ETFs) tracking technology companies after shares fell sharply on mixed earnings from heavyweights.
The iShares US Technology ETF (IYW-A), which has $11.2 billion in assets with Apple (AAPL-Q) and Microsoft (MSFT-Q) among its top holdings, saw net inflows of $694 million in the week ended Oct. 25, according to Lipper data, its best performance in over a year.
“Investors want large-cap tech exposure – whether that’s because they can handle higher rates better or simply because they’re more comfortable with those names in a really challenging macro environment,” said Todd Sohn, ETF and technical strategist at Strategas Securities.
The fund’s price fell nearly 4% in the week, as mixed results from megacaps like Alphabet weighed on the sector.
Despite potential short-term challenges, investors are starting to turn attention to 2024 where tech is expected to outperform, said Todd Rosenbluth, research head at VettaFi.
Tech-heavy Nasdaq gained 20% since the start of the year, supported by rallies in the “Magnificent 7″ tech stocks on optimism around artificial intelligence.
However, worries about higher-for-longer interest rates have stalled the momentum and set the benchmark on course for monthly losses.
Tech funds saw inflows of $2 billion in the week to Wednesday, their largest in eight weeks, according to BofA Global Research, which it attributed to investors “buying the dip.”
The $14 billion ProShares UltraPro QQQ (TQQQ-Q) posted net weekly inflows of $68.15 million, even as the price of the fund fell 9.5%.
“TQQQ is experiencing a surge in net flows as more aggressive retail traders seek to make big gains on hopes of a quick rebound,” Vanda Research’s analysts said in a note.
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