By Paul R. La Monica

Good things can come in old packages, and that's the case with the State Street Technology Select Sector SPDR exchange-traded fund, the granddaddy of tech-focused ETFs, which trades under the ticker XLK.

There are numerous other ways to invest in tech, including the Roundhill Magnificent Seven ETF (MAGS) for the megacaps that dominate the S&P 500, the iShares Semiconductor $(SOXX)$ and VanEck Semiconductor $(SMH)$ ETFs for surging chip stocks, and the iShares Expanded Tech-Software Sector ETF $(IGV)$, which has been crushed in the so-called Saas-pocalypse.

But a mixed bag of earnings this past week from Amazon.com, Alphabet, Microsoft, Meta Platforms, and Apple has reinforced the notion that XLK may be the way to go. Alphabet surged to a new all-time high following earnings, and Amazon was flat. But Microsoft and Meta were hit hard by worries about their capital spending plans, which caused the Mag Seven ETF to drop about 0.5% the day after the earnings deluge. It's now flat for the year. The IGV ETF has tumbled more than 20% in 2026 as investors bailed on software stocks. SOXX has gained over 50% this year, but is likely to underperform once the chip boom turns to bust.

XLK owns Nvidia, Apple, and Microsoft -- Amazon and Tesla are consumer-discretionary stocks, while Alphabet and Meta are in the communications services sector -- and it also holds top top-performing stocks such as Sandisk, Western Digital, Seagate Technology Holdings, and Intel, which have all more than doubled thanks to surging demand for chips and storage due to AI. It owns software too, but not enough to overwhelm the rest of the portfolio -- it's gained nearly 11% this year

That growth should continue too. Earnings for XLK members are expected to be up 43% this year from last and rise another 24% in 2027, compared with projected growth rates of 22% for the Mag Seven in 2026 and 20% next year. The XLK fund also owns several "older" tech companies that have enjoyed a second life as AI beneficiaries, such as Cisco Systems, Corning, Dell Technologies, and Hewlett Packard Enterprise.

Analysts at SentimenTrader pointed out in a report that breadth is improving for the XLF ETF. The number of winners in the fund over a 10-day stretch in mid-to-late April was more than twice the number of stocks that fell over that same period. The analysts noted that whenever tech stocks have a "breadth thrust of this magnitude, the positive price momentum typically persists over the subsequent one-year window." They highlighted Microchip Technology, Texas Instruments, Analog Devices, and Jabil Circuit as being among the stocks that look particularly attractive on a technical basis.

And despite its winning ways, XLK looks cheaper than some of the tech alternatives. It's trading for just under 25 times earnings estimates for this year, a discount to its five-year average forward price/earnings ratio of 27.5. It is also cheaper than SOXX, which is valued around 27 times earnings estimates, and trading at a notable discount to the Mag Seven, which trade for 31 times earnings.

Investors looking to ride the tech wave shouldn't limit themselves to a small group of giants or one hot sector.

This tech oldie is still a goody.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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May 01, 2026 01:30 ET (05:30 GMT)

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