The S&P 500 is having a solid year. The broad market index is up nearly 8% year-to-date despite the impacts of the war with Iran.
However, as good as the S&P 500 has been this year, the Vanguard Information Technology Index Fund (VGT 0.69%) has been even more unstoppable. It has more than doubled the broader market index with a 22% return. Here’s a look at whether it’s a buy right now.
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VGT versus the S&P 500
The Vanguard Information Technology Index Fund aims to measure the investment returns of tech stocks. It does that by passively tracking an index of companies in the electronics and computer industries. The fund currently holds 323 stocks, providing exposure to the entire tech sector.
However, while the fund holds lots of tech stocks, it has a very high concentration at the top. Its top five holdings account for more than 50% of the fund’s assets:
- Nvidia: 16.8%
- Apple: 15.3%
- Microsoft: 9.9%
- Broadcom: 4.5%
- Micron Technology: 4.2%
That’s a much higher percentage than the S&P 500’s 27.5% allocation to its top five holdings. As a result, the S&P 500 has a much lower allocation to those five tech stocks, which are also among its top ten holdings.
VGT’s focus on technology stocks has enabled it to deliver higher returns than the S&P 500 not only this year, but also in every period over the last decade:
|
Fund |
1-Year |
3-Year |
5-Year |
10-Year |
|---|---|---|---|---|
|
Vanguard Information Technology ETF |
60.4% |
33.2% |
21.9% |
25.4% |
|
S&P 500 Index |
29.8% |
23.6% |
14.2% |
15.7% |
Data source: Vanguard.
That’s because technology stocks, for the most part, are growing faster than most other companies. They’re capitalizing on secular growth megatrends such as AI, cloud computing, and increased digitalization.
Vanguard Information Technology ETF
Today’s Change
(-0.69%) $-0.80
Current Price
$115.13
Key Data Points
Day’s Range
$113.85 – $116.84
52wk Range
$81.42 – $126.00
Volume
5.1M
Tech growth trends are gaining steam
The growth drivers behind the VGT’s more than 20% surge this year are only strengthening. AI-related capital spending alone is on track to reach $765 billion this year, according to Goldman Sachs‘ estimate. The investment bank expects annual AI capex spending to hit $1.6 trillion by 2031. That’s more than $7.6 trillion in cumulative investment, with the bulk of it ($5.1 trillion) going toward compute (i.e., chips and memory), benefiting companies like Nvidia, Broadcom, and Micron Technologies.
Meanwhile, heavy AI capex investors such as Microsoft ($190 billion in capex in 2026, up 24% from last year) should start seeing returns on their investment in the coming years through new AI product launches and services. That positions them to deliver robust revenue and earnings growth, which could continue driving their stock prices higher.
VGT could remain unstoppable
The Vanguard Information Technology ETF has delivered more than double the return of the S&P 500 due to its focus on tech stocks. These companies are benefiting from megatrends such as AI, which will continue to drive their growth in the coming years. That positions VGT to continue its unstoppable outperformance, making it a top ETF to buy to capitalize on tech-driven growth trends.
Matt DiLallo has positions in Apple and Broadcom and has the following options: short September 2026 $300 calls on Apple. The Motley Fool has positions in and recommends Apple, Broadcom, Goldman Sachs Group, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.