Forecasts for higher spending across multiple technology fronts could potentially benefit an array of ETFs, but the ALPS Disruptive Technologies ETF (CBOE: DTEC) is well-positioned to capitalize on that theme due to its broad reach throughout the tech ecosystem.
DTEC tracks the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across ten thematic areas, including Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics, and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.
“Capital spending in the information technology sector has more than doubled during the past decade, primarily due to the cost of making semiconductors and building cloud-computing networks, according to an analysis by S&P Global Market Intelligence.”
The rise of cloud computing has never been more apparent amid the Covid-19 pandemic. With social distancing measures in place, a lot of businesses have their heads in the clouds—that is, using cloud computing as a primary way to run their core businesses—something that will benefit cloud computing ETFs, such as DTEC.
Big Growth Coming
Cloud computing represents a significant source of disruption not only in the technology sector but in the investment world as well. It has become ingrained in nearly every aspect of our lives by fundamentally altering how we consume, process, and share information in the digital age. The trend toward cloud-based solutions offers a compelling, long-term opportunity for investors to gain exposure to a quickly developing segment of the technology sector.
“The information technology companies with the highest capex for the 12 months ending March 30 were Intel Corp. at $16.16 billion; Microsoft Corp. at $14.75 billion; and Apple Inc. at $8.74 billion. Each represents a different business model with different spending drivers as the companies seek to stay competitive,” according to S&P Global Market Intelligence.
Those tech titans don’t reside in DTEC, but some of their suppliers do, levering the fund to rising spending across the tech spectrum. DTEC is already reflecting some of the expectations for increased IT spending as the fund is higher by 20.42% year-to-date and up more than 74% off its March lows.
Other technology funds to consider include the Technology Select Sector SPDR ETF (NYSEArca: XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
