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Technology Select Sector SPDR Fund (NYSEARCA:XLK), which tracks the S&P 500’s information technology sector, has gained 8.1% so far this year, underperforming the 10% gain of the broader S&P 500 index.
The sector with the highest weightage on the S&P consists of companies ranging from Microsoft (MSFT), maker of the Windows operating system, chipmaker Nvidia (NVDA), and cloud company Oracle (ORCL).
While tech may be dominating all the headlines, it underperformed Communication Services (XLC), Financial (XLF), Energy (XLE), and Industrial (XLI) during the quarter.
Industries 2023 Performance
Software & Services rose nearly 9% in the first-quarter, while Technology Hardware & Equipment tumbled about 7%, and Semiconductors & Semiconductors Equipment soared over 39%.
U.S. stock fund flows into and out of the technology sector have varied from week to week. The technology-focused ETF had a net inflow of $2.06 billion as of March 28.
Top 5 gainers and losers in Q1
- Gainers: Super Micro Computer (SMCI) +243%.
- Nvidia (NVDA) +83%.
- Micron Technology (MU) +36%.
- Western Digital (WDC) +30%.
- Juniper Networks (JNPR) +26%.
- Losers: Adobe (ADBE) -16%.
- ON Semiconductor (ON) -14%.
- Intel (INTC) -13%.
- Apple (AAPL) -11%.
- Enphase Energy (ENPH) -11%.
What Analysts Expect
Seeking Alpha analysts at large consider XLK a Buy. Of the four analysts, two consider it a Buy and two consider it a Hold.
Analysts at Oppenheimer believe technology’s momentum is largely driven by complacency.
According to SA analyst Danil Kolyako, “XLK ETF has potential for further growth, with Apple’s announcement of iOS 18 potentially leading to a new rally.”
“Q4 FY23 earnings beat expectations, but Q1 guidance was subdued. Valuation levels are getting stretched, suggesting a potential pullback in the market,” noted SA analyst Uttam Dey.
What Quantitative Measures Say
XLK secured a Buy rating from Seeking Alpha’s Quant Rating system with a score of 4.42 out of 5. The ETF scored an A+ for both momentum and revisions, an A for expenses, a B for dividends, and a B- for risk.
