5 Best Performing Technology ETFs in 2023

In this article, we discuss 5 best performing technology ETFs in 2023. If you want to read our discussion on the current technology landscape, head over to 10 Best Performing Technology ETFs in 2023. 

5. iShares Semiconductor ETF (NASDAQ:SOXX)

YTD Share Price Performance as of August 24: 45.35%

iShares Semiconductor ETF (NASDAQ:SOXX)’s primary objective is to replicate the investment outcomes of the ICE Semiconductor Index, which comprises American equities within the semiconductor industry. The fund’s inception date was July 10, 2001. As of August 23, 2023, iShares Semiconductor ETF (NASDAQ:SOXX)’s portfolio contains 30 stocks and features an expense ratio of 0.35%. It is one of the best performing technology ETFs to invest in. 

Broadcom Inc. (NASDAQ:AVGO), a California-based semiconductor company, is one of the top holdings of the iShares Semiconductor ETF (NASDAQ:SOXX). On June 1, Broadcom Inc. (NASDAQ:AVGO) reported a Q2 non-GAAP EPS of $10.32 and a revenue of $8.73 billion, outperforming Wall Street estimates by $0.18 and $20 million, respectively. The company also repurchased 5.6 million common shares valued at $3,420 million. 

According to Insider Monkey’s second quarter database, 72 hedge funds were bullish on Broadcom Inc. (NASDAQ:AVGO), with Rajiv Jain’s GQG Partners holding a prominent stake in the company, comprising 1.10 million shares worth $955.7 million. 

Here is what Aristotle Atlantic Partners has to say about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2023 investor letter:

“Broadcom contributed to outperformance, as the company is seen as a key beneficiary of the investment in generative Artificial Intelligence (AI) and Large Language Models (LLM). The company’s Application-Specific Integrated Circuit (ASIC) chips are being custom-built for customers to use in their data centers for accelerated computing. Broadcom’s networking chipsets are also expected to see increased levels of demand, as customers increase investments to enable the high-speed data transfer required by advanced AI training and inference. The company also announced a new multi-year supplier relationship with Apple, the company’s largest customer.”

4. iShares U.S. Technology ETF (NYSE:IYW)

YTD Share Price Performance as of August 24: 46.54%

The main objective of the iShares U.S. Technology ETF (NYSE:IYW) is to replicate the investment performance of the Russell 1000 Technology RIC 22.5/45 Capped Index, which consists of U.S. technology sector equities. This index offers exposure to American firms in electronics, computer software and hardware, and information technology sectors. iShares U.S. Technology ETF (NYSE:IYW) was introduced on May 15, 2000. As of August 24, 2023, the fund holds a portfolio comprising 136 stocks, and its net assets are valued at $10.8 billion. It features an expense ratio of 0.39%. iShares U.S. Technology ETF (NYSE:IYW) is one of the best performing ETFs in the technology sector. 

Microsoft Corporation (NASDAQ:MSFT) is one of the top holdings of the iShares U.S. Technology ETF (NYSE:IYW). The acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI) by Microsoft Corporation (NASDAQ:MSFT) for $69 billion is expected to be finalized around the beginning of October. This follows Microsoft’s submission of an updated agreement to the UK antitrust authority. There’s a chance that the European Union might request Microsoft to resubmit the deal, but this outcome remains uncertain presently.

According to Insider Monkey’s second quarter database, 300 hedge funds were bullish on Microsoft Corporation (NASDAQ:MSFT), compared to 289 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 39.2 million shares worth $13.3 billion. 

Mairs & Power Growth Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2023 investor letter:

“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon and Microsoft Corporation (NASDAQ:MSFT) were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.

Microsoft (MSFT) was another positive contributor to performance in the first half. The company continued to take share in cloud computing. Its strong relationships with customers, as well as knowledge of their businesses, differentiates its offering, which is also helped by leading investments in AI. We expect the company will continue to integrate AI tools into most of its productivity suite of software in the not-too-distant future. This should help with employee productivity and the labor constraints of most of its customers.”

3. ARK Next Generation Internet ETF (NYSE:ARKW)

YTD Share Price Performance as of August 24: 47.52%

ARK Next Generation Internet ETF (NYSE:ARKW) is one of the best performing ETFs in the technology space. ARK Next Generation Internet ETF (NYSE:ARKW) is an actively managed ETF aiming to invest in the theme of next-generation internet. The companies included in ARKW are concentrated on the transition of technology infrastructure to cloud-based platforms. Established on September 30, 2014, the ETF holds net assets valued at $1.65 billion as of July 31, 2023, and offers an expense ratio of 0.88%. 

ARK Next Generation Internet ETF (NYSE:ARKW) is heavily invested in Roku, Inc. (NASDAQ:ROKU), a California-based company operating a TV streaming platform. On July 27, Roku, Inc. (NASDAQ:ROKU) reported a Q2 GAAP EPS of -$0.76 and a revenue of $847 million, outperforming Wall Street estimates by $0.51 and $72.47 million, respectively. There were 73.5 million active accounts in Q2, representing a growth of 1.9 million accounts from Q1 2023. Roku’s total streaming hours reached 25.1 billion, indicating an annual increase of 4.4 billion hours.

According to Insider Monkey’s second quarter database, 29 hedge funds were bullish on Roku, Inc. (NASDAQ:ROKU), compared to 27 funds in the earlier quarter. Cathie Wood’s ARK Investment Management is the leading position holder in the company, with approximately 12 million shares worth $764.85 million. 

Here is what Saga Partners has to say about Roku, Inc. (NASDAQ:ROKU) in its Q2 2022 investor letter:

“The Portfolio first bought Roku in Q3’20. It was a company we followed closely given our investment in The Trade Desk and its importance in connected television (CTV). Roku continued to impressively grow its CTV market share and it took some extra work to understand the underlying dynamics causing Roku’s success. I think there is some misunderstanding surrounding the connected television landscape. Since I haven’t written extensively on the topic in past letters, I thought it would be helpful to provide a little more background on the underlying dynamics of the space below…” (Click here to see the full text)

2. VanEck Semiconductor ETF (NASDAQ:SMH)

YTD Share Price Performance as of August 24: 52.68%

VanEck Semiconductor ETF (NASDAQ:SMH)’s goal is to imitate the price and yield results of the MVIS® US Listed Semiconductor 25 Index. This index is designed to monitor the collective performance of companies engaged in semiconductor manufacturing and equipment. VanEck Semiconductor ETF (NASDAQ:SMH) was founded on December 20, 2011. As of August 24, 2023, the total net assets of the fund stand at $9.63 billion, along with an expense ratio of 0.35%. It is one of the best performing ETFs in the tech space.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a prominent holding of VanEck Semiconductor ETF (NASDAQ:SMH). On July 20, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) reported a Q2 GAAP EPADR of $1.14 and a revenue of $15.68 billion, outperforming Wall Street estimates by $0.06 and $300 million, respectively. 

According to Insider Monkey’s second quarter database, 121 hedge funds were bullish on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), compared to 102 funds in the prior quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the largest stakeholder of the company, with 9 million shares worth $914 million. 

Baron Emerging Markets Fund made the following comment about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its first quarter 2023 investor letter:

“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed in the first quarter due to easing geopolitical concerns and expectations for end-demand recovery later in 2023. We retain conviction that Taiwan Semi’s technological leadership; pricing power; and exposure to secular growth markets, including high-performance computing, automotive, 5G, and IoT; will allow the company to sustain strong earnings growth over the next several years.”

1. SoFi Web 3 ETF (NASDAQ:TWEB)

YTD Share Price Performance as of August 24: 59.45%

The objective of the SoFi Web 3 ETF (NASDAQ:TWEB) is to replicate the performance, prior to fees and expenses, of the SoFi Solactive ARTIS® Web 3.0 Index. The index tracks equities listed on US, developed markets, and South Korean securities exchanges. The underlying index invests in four thematic categories – Big Data & Artificial Intelligence, Blockchain Technology, Metaverse, and NFT & Tokenization. SoFi Web 3 ETF (NASDAQ:TWEB) was established on August 8, 2022. Currently, it manages $1.35 million in assets and carries an expense ratio of 0.59%. It is one of the best performing technology ETFs in 2023. 

DraftKings Inc. (NASDAQ:DKNG), an American digital sports entertainment and gaming company, is the largest holding of SoFi Web 3 ETF (NASDAQ:TWEB). On August 3, DraftKings Inc. (NASDAQ:DKNG) reported a Q2 non-GAAP EPS of $0.14 and a revenue of $875 million, outperforming market expectations by $0.28 and $112.16 million, respectively. 

According to Insider Monkey’s second quarter database, 40 hedge funds were long DraftKings Inc. (NASDAQ:DKNG), compared to 37 funds in the preceding quarter. 

Baron Discovery Fund made the following comment about DraftKings Inc. (NASDAQ:DKNG) in its Q1 2023 investor letter:

“We re-initiated a position in the former Fund holding DraftKings Inc. (NASDAQ:DKNG), a leading online sportsbook, digital casino, and daily fantasy sports operator. DraftKings’ mobile applications offer consumers the ability to wager on a wide variety of sporting events and play hundreds of real-money casino games. The company has spent the past three years building a proprietary technology stack that improves the customer experience and delivers best-in-class breadth of bet types (such as parlays, same-game parlays, and player props). State-level online sports betting (OSB) and iCasino legalization, along with a multi-year consumer adoption timeline in active states, has supported a 90% revenue growth rate for DraftKings since 2020. The opportunity for OSB legalization remains significant, with under 50% of the U.S. population currently having legal mobile sports betting. We expect 65% to 80% of the population will eventually have access to OSB. ICasino is currently legal in just seven states representing roughly 13% of the population. ICasino product adoption in legalized states has been robust, with the average user spending twice as much as a sports bettor. While the pace of legalization for iCasino has been slower, we believe additional states will pass regulation in the coming years.

As U.S. states began to legalize sports betting, the DraftKings management team moved quickly to build widespread brand awareness. DraftKings is the #2 operator in both OSB and iCasino by a wide margin, and has demonstrated improving market share trends across almost all states. When a new state legalizes sports betting, DraftKings has a first mover advantage as many of its customers are converted from the DraftKings daily fantasy sports offering. The quality of their sportsbook product along with increasingly targeted promotional spending results in strong customer retention and high lifetime values. In states where iCasino is legal, DraftKings can cross-sell OSB customers. DraftKings’ scale and product advantages are creating a flywheel that will enable the company to continue to out-invest the competition in acquisition marketing, retention, and research and development. The high barriers to entry are resulting in a consolidated industry that will eventually lead to a highly profitable business. This is evidenced by older-vintage state contribution margins that are already approaching 40%. Longer term, we believe DraftKings can generate EBITDA margins between 20% and 30% with strong free-cash-flow conversion.”

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