The S&P 500 has been on a bull run this year, touching a series of record highs buoyed by rate cut bets, strong corporate profit growth and the ongoing artificial intelligence (AI) craze. The benchmark registered its 30th record close of the year.
SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, has gained 14.5% so far this year. While many stocks powered the ETF, technology has been the clear leader. Here, we have highlighted five technology stocks that have led the way higher in the ETF so far this year and have a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold). These are Super Micro Computer Inc. SMCI, NVIDIA Corporation NVDA, Micron Technology MU, Broadcom AVGO and Western Digital Corporation WDC (read: Here’s Why Tech ETFs Will Continue Their Bull Run).
The solid trend is likely to continue in the months ahead as the tech-fueled rally has made Wall Street analysts even more bullish. An analyst at Goldman boosted the year-end target price to 5,600 from 5,200 for the S&P 500 Index for the third time, citing an optimistic outlook for earnings growth and the U.S. economy.
Meanwhile, Evercore ISI, one of the prominent bear analysts, turned bullish and expects the stock market to surge another 10% by the end of the year. It raised its year-end S&P 500 price target from 4,750 to 6,000 — a new high on Wall Street. The analyst stated that the “AI revolution is in the early innings,” and that should lead to continued strength in earnings growth. Evercore ISI forecasts S&P 500 EPS growth of 8% and 5% in 2024 and 2025, respectively.
Inflation in the United States cooled down in May for the second consecutive month. The Consumer Price Index rose 3.3% year over year in May, down from an annual growth of 3.4% in April. On a monthly basis, prices were flat for the first time since July 2022. Easing inflation indicates that the economy is stabilizing, and interest rates may be declining (read: 5 ETF Zones to Benefit as Inflation Cools in May).
In the latest FOMC meeting, U.S. policymakers penciled in just one rate cut for this year. They expect four cuts in 2025. The Fed altered language in its statement, noting there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress. Low rates reduce the cost of borrowing, often needed to finance the expansion of companies, thereby driving growth in the economy. It typically reduces the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets.
In particular, the “Magnificent Seven” is the biggest engine of growth for the S&P 500 as a whole, accounting for 31% of the weightage in the index.
Let’s take a closer look at the fundamentals of SPY.
SPY in Focus
SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7.2% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors, with information technology, financials, and healthcare accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has an AUM of $535 billion and charges 9 bps in fees per year. It trades in an average daily volume of 50 million shares and has a Zacks ETF Rank #2 with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below, we have highlighted the abovementioned five best-performing stocks in the ETF.
Best-Performing Tech Stocks in SPY
Super Micro designs, develops, manufactures and sells energy-efficient, application-optimized server solutions based on the x86 architecture. The stock has skyrocketed 212% this year and accounts for a 0.09% share in the SPY portfolio.
Super Micro has an estimated earnings growth rate of 44.6% for the fiscal year (ending June 2025) and a Zacks Rank #3.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of graphic processing units. The stock has jumped 164.5% this year. It has an estimated growth of 106.1% for the fiscal year (ending January 2025).
NVIDIA makes up 7.1% of the assets in SPY and currently has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology has established itself as one of the leading worldwide providers of semiconductor memory solutions. The stock makes up for 0.3% of the assets in the SPY portfolio.
Micron Technology has gained 73.2% and has an expected earnings growth rate of 119.1% for the fiscal year (ending August 2024). It has a Zacks Rank #2.
Broadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. The stock has soared about 64% this year and accounts for a 1.7% share in the SPY portfolio (read: Broadcom Jumps on Q2 Earnings Beat: ETFs to Buy).
Broadcom has an estimated earnings growth rate of 11.6% for the fiscal year (ending October 2024) and a Zacks Rank #3.
Western Digital is a leading developer and manufacturer of data storage devices and solutions based on NAND flash and hard disk drive technologies. The stock has gained 52.5% this year and accounts for a 0.05% share in the SPY portfolio.
Western Digital has an estimated earnings growth rate of more than 1000% for the fiscal year (ending June 2025) and a Zacks Rank #2 at present.
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Western Digital Corporation (WDC) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report
Read More: 5 Technology Stocks Powering S&P 500 ETF This Year