The S&P 500 Is Down But These 3 Tech ETFs Are Proving the Bull Case Isn’t Dead
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Technology Select Sector SPDR Fund (XLK) is up 33% over the past year, Vanguard Information Technology ETF (VGT) has gained 31%, and Roundhill Magnificent Seven ETF (MAGS) is up 31%, all outpacing the S&P 500’s 20% return, driven by concentrated holdings in Nvidia, Apple, and Microsoft that have surged in sustained demand.
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AI capital spending trajectories from cloud providers like Amazon, Microsoft, and Alphabet will determine whether these heavily concentrated tech funds continue outperforming or face pressure from pullbacks in data center investment guidance.
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The S&P 500 is down nearly 3% year-to-date, yet three widely held tech ETFs are quietly telling a different story. While broad market sentiment has soured on equities in early 2026, the funds most concentrated in AI-era technology names have outperformed the broader index over the past year by a wide margin.
Technology Select Sector SPDR Fund (NYSEARCA:XLK), Vanguard Information Technology ETF (NYSEARCA:VGT), and Roundhill Magnificent Seven ETF (NYSEARCA:MAGS) are each cited as up over the past month while the S&P 500 has declined roughly 2.5%. That framing deserves nuance. Looking at the actual one-month data, XLK is down about 4% over the past month, VGT is similarly off, and MAGS has pulled back more than 5%. The S&P 500 itself is down about 4% over the same window. These three funds have broadly tracked the market’s recent decline rather than outpacing it.
The one-year picture tells a more compelling story. XLK is up 33% over the past year, outpacing the S&P 500’s 20% over that same period return over the same period. VGT and MAGS have posted comparable gains, with VGT has gained 31% and MAGS is up 31% as well. That outperformance reflects what happens when the heaviest weights in a fund — Nvidia, Apple, and Microsoft — spend a full year in sustained demand, compounding gains that a diversified index simply cannot match.
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The single biggest macro force for these three funds is the trajectory of AI capital spending. All three carry enormous exposure to companies building and supplying AI infrastructure. Nvidia alone represents 18% of VGT’s portfolio, and the top three holdings in XLK (Nvidia, Apple, and Microsoft) combine for roughly 39% of the fund. When hyperscalers like Amazon, Microsoft, and Alphabet signal accelerating data center buildouts, semiconductor names surge and lift all three funds. When those companies hint at spending discipline or project delays, the reverse happens fast.
The clearest place to monitor this is in quarterly earnings calls from major cloud providers. Pay attention to capital expenditure guidance specifically. A meaningful upward revision signals continued tailwinds for chip and infrastructure names. A pullback in those figures would pressure the largest holdings across all three funds simultaneously, given how concentrated each one is.
Each fund handles concentration differently. XLK and VGT are market-cap weighted, meaning performance is increasingly driven by a handful of names. MAGS uses an equal-weight structure across the Magnificent Seven, combining direct equity positions with swap derivatives to maintain that balance regardless of market cap. The fund launched in April 2023 and has operated almost entirely in a favorable environment for mega-cap tech, so its behavior in a sustained downturn is less tested than its older peers.
The structural detail in how MAGS achieves equal weighting involves the use of swaps. The fund carries a significant negative cash offset of around 61%, a byproduct of how the derivative overlay works. This is not leverage in the traditional sense, but the fund’s mechanics are more complex than a standard index ETF. Investors can track holdings and rebalance disclosures directly through Roundhill’s fund page.
For XLK and VGT, watch whether Nvidia maintains its outsized weighting. If Nvidia’s share price pulls back materially relative to peers, both funds would mechanically reduce their exposure at the next rebalance per their index methodology.
If AI capital spending from major cloud providers holds or grows through mid-2026, the concentration in semiconductor and infrastructure names that defines all three funds has historically correlated with stronger performance in semiconductor and infrastructure names. Watch the MAGS rebalance schedule and Roundhill’s holdings disclosures closely: any structural shift in how the fund maintains equal weighting across the seven names could change its risk profile in ways that are not obvious from its short track record alone.
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