These 3 High-Momentum ETFs Are Riding the Tech Wave
The tech sector is among the best-performing corners of the market so far in 2025, with sector-wide returns of nearly 28% year-to-date (YTD) compared to over 17% for the overall S&P 500. In fact, the tech sector's performance—and the outsized returns of a handful of big names in particular—has been enough to prompt speculation among investors about an AI-related bubble that could be helping prop up other large chunks of the market that would otherwise be struggling.
Bubble or not, investors seeking major returns this year may have found success with tech stocks. Further, many tech-focused exchange-traded funds (ETFs) have managed to match or even outperform the broader sector thanks to their unique strategies and portfolios. Past performance is, of course, no guarantee that these ETFs will continue to shine, but so long as AI and related industries are booming, this momentum may continue.
Early Cloud Computing Fund With a Wider Tech Reach
The First Trust Cloud Computing ETF (NASDAQ: SKYY) was a pathbreaker as the first ETF with a narrow focus on the cloud computing industry in the United States. With nearly a decade and a half of history, SKYY is well-established in its asset base (with about $3.3 billion in managed assets). However, its niche strategy has kept its one-month average trading volume relatively low at around 156,000.
SKYY has a moderately narrow portfolio of under 70 names, and is fairly concentrated in a much smaller portion of those positions. The top 10 holdings account for nearly 40% of invested assets and include large tech names with a cloud computing arm, like International Business Machines Corp. (NYSE: IBM), and pure-play cloud computing firms such as Pure Storage Inc. (NYSE: PSTG).
This aspect of SKYY's strategy, which involves including larger tech companies even if they do not generate most of their revenue from cloud services, means it benefits when the overall sector is doing well but can also reduce its focus on cloud industry-specific growth. Fortunately, the tech space's gains have helped SKYY surge by about 35% in the last six months, making its annual fee of 0.60% worthwhile for many investors.
Developed Markets AI Focus Has Sent AIQ Soaring
With an asset base over twice as large as SKYY and more than 10x the trading volume, the Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ) is a newer and more liquid alternative. AIQ has a double focus on AI: It invests in firms providing the hardware that makes AI possible and in a wider group of firms across sectors that potentially stand to benefit from AI developments.
In practice, the majority (around 71%) of AIQ's holdings are in the information technology sector. Still, the fund also holds stocks in the consumer discretionary, communication services, and industrials spaces, among others. AIQ's mandate is more extensive than SKYY's because it invests in companies from various developed markets. However, U.S. firms still represent over two-thirds of the portfolio of nearly 90 different companies.
AIQ has risen by nearly 44% in the last six months, and the fund's expense ratio is 0.68%.
FTEC Is a Low-Cost, Highly Diversified Fund...But Watch Out for Portfolio Concentration
The most inexpensive ETF on our list is the Fidelity MSCI Information Technology Index ETF (NYSEARCA: FTEC), with an annual fee of just 0.08%. A broad-based tech sector fund, FTEC holds close to 300 names. However, investors should keep in mind that this diverse basket heavily prioritizes a handful of companies: the top three positions alone make up around 42% of invested assets.
At almost $17 billion in assets managed, FTEC is the largest fund among these three. However, FTEC's trading volume is much closer to SKYY's than to AIQ's, so investors may have some liquidity concerns.
Among these three funds, FTEC has also had the strongest performance in the last six months, skyrocketing by more than 45%. FTEC is a strong option in an increasingly crowded pool of funds for buy-and-hold investors looking for easy access to the tech space.
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