How Sidestepping Big Tech has Paid Off Lately in These Stock ETFs
Welcome back, Traders on Trend! Let’s dive into the current ETF landscape and discuss why stepping away from the heavyweights of Big Tech is proving to be a bullish move for savvy investors. Recent trends show that ETFs which minimize or exclude exposure to prominent megacap stocks are outperforming the likes of the Roundhill Magnificent Seven ETF (MAGS) and the popular Invesco QQQ Trust Series I (QQQ), so buckle in as we analyze the opportunities that lie ahead.
Big Tech Stocks Under Pressure
As of Thursday, the Roundhill Magnificent Seven ETF (MAGS), which holds the big names in tech—namely Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META), and Tesla (TSLA)—has experienced a downturn of approximately 0.4% over the past month. This pales in comparison to the impressive 3.7% gain from the Defiance Large Cap ex-Mag 7 ETF (XMAG), which provides a more balanced approach by excluding these tech giants. This line of thinking is proving to be a significant shift as market players seek to reduce concentrated risk in their portfolios amid economic uncertainty.
Understanding the Landscape
As we assess the market, it’s essential to note that the volatility surrounding these megacap stocks can disproportionately influence major indexes like the S&P 500 (SPX) and Nasdaq 100 (NDX). Investors are increasingly examining diversified strategies to cushion against the potential fallout from a few underperforming tech giants. In response, funds that leverage equal-weighting strategies or omit the top 30 stocks in the Nasdaq have seen outsized returns recently.
Rallying with Equal Weight Strategies
Consider the Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE), which has surged by 3.7% lately. It stands out against the Invesco QQQ Trust Series I (QQQ)—which only managed a 1.9% gain—due to its strategy of evenly distributing exposure across stocks in the Nasdaq 100. This method allows investors to benefit from everything from tech innovators to up-and-coming players, rather than just the heavily-weighted behemoths.
Moreover, the iShares Nasdaq-100 ex Top 30 ETF (QNXT) has performed even better with an impressive 4.6% boost as of Thursday, capitalizing on the broader spectrum of companies performing outside the concentrated influence of the largest tech stocks. In fact, QNXT is outpacing the Nasdaq 100 so far in 2025 with a 6.5% lift, compared to QQQ’s year-to-date gain of 4.2%.
Sector Rotation in Focus
It’s also worth highlighting the evolving trends within the tech sector itself. Doug Yones, the CEO of Direxion, noted that despite some bearish sentiments, the majority of ETF activities appear more bullish than ever. In particular, ETFs focusing on semiconductors have seen significant gains, with the iShares Semiconductor ETF (SOXX) climbing 9.2% and VanEck Semiconductor ETF (SMH) skyrocketing by 10.2% in 2025.
AI and Robotics are Driving Returns
Looking to the horizon, ETFs that spotlight artificial intelligence are also displaying dynamic performance. The Global X Robotics & Artificial Intelligence ETF (BOTZ) and the Global X Artificial Intelligence & Technology ETF (AIQ) have risen 8.1% and 5.6% respectively. Both show promise while also taking advantage of the burgeoning AI wave without being too weighed down by the mega-caps.
Final Thoughts: Staying Ahead of the Curve
As we launch into this exciting trading year, the data is clear: avoiding concentrated bets in megacap tech stocks can lead to improved portfolio performance. A diversified approach through excluding top-heavy ETFs or using equal-weight strategies could pave your way to consistent gains. Keep your eyes peeled on those sectors notably benefiting from AI and semiconductors—these trends look poised for continued upside.
Remember, adaptability and insight are your greatest assets. Keep trading smart, and let’s ride the momentum together!
For more real-time insights and tips, connect with us on [Twitter](https://twitter.com/cidzelis) and [LinkedIn](https://www.linkedin.com/in/christopher-idzelis-10b5761a6). Join the conversation or share your experiences with us.
