ETFs to Surge as Microsoft Tops $3.5T, Reclaims Top Spot

Microsoft MSFT soared to a historic high, lifting its market capitalization to approximately $3.5???trillion, overtaking NVIDIA (NVDA), which reclaimed the top position last week and currently has a market cap of $3.47 trillion. The achievement came as the software maker rallied about 30% since its April lows and added about $800???billion in market value.Investors should tap Microsoft's growth with ETFs having double-digit exposure to the software leader. These include iShares Dow Jones US Technology ETF IYW, MSCI Information Technology Index ETF FTEC, Vanguard Information Technology ETF VGT, iShares Top 20 U.S. Stocks ETF TOPT and Technology Select Sector SPDR Fund XLK.What’s Fueling Microsoft’s Surge?Cloud and AI Power Growth Microsoft’s Intelligent Cloud segment remains a core driver of performance, posting 21% year-over-year revenue growth last quarter. Azure’s continued strength highlights increasing enterprise demand for AI-powered solutions. Management anticipates similar momentum through the current quarter (read: Cloud & AI Power Microsoft's Fiscal Q3 Earnings: ETFs to Tap).The company’s deep ties to OpenAI, through investments and exclusive licensing, have boosted confidence in continued cloud revenue growth. Azure and intelligent cloud services are expected to deliver 13% sales growth over the next four quarters.The integration of Copilot across enterprise and productivity suites reinforces Microsoft’s positioning as a key AI platform provider. At the recent Microsoft Build conference, the company unveiled a broader AI product roadmap, reinforcing its leadership in enterprise technology. Analysts at Wedbush declared Microsoft “in the driver’s seat on the AI front,” highlighting its infrastructure advantage in the accelerating digital transformation landscape.Analysts Lift Target PriceAnalysts remain bullish on the stock, with an average brokerage recommendation (ABR) of 1.28 made by 46 brokerage firms. Out of them, 37 are Strong Buy and five are Buy. Strong Buy and Buy, respectively, account for 80.43% and 10.87% of all recommendations. The average price target for Microsoft comes to $515.74, ranging from a low of $448.00 to a high of $626.00.Bernstein and Goldman Sachs are among the latest firms to raise the target price on Microsoft. Bernstein boosted the target price to $540 from $520, citing sustained benefits from Microsoft’s strategic partnership with OpenAI. Meanwhile, Goldman Sachs lifted its forecast to $550 from $480, projecting that Microsoft’s cloud revenues could reach $300 billion by 2029.Solid Valuation and Market PerformanceThe financials of MSFT remain strong, with a P/E ratio of 35.28 versus a P/E ratio of 33.86 for Amazon (AMZN), 33.42 for NVDA, 18.34 for Alphabet (GOOGL) and 25.25 for the industry. While Microsoft's valuation multiples are higher than its peers, its cash flow stability and growth trajectories warrant the premium. Microsoft’s long-term performance continues to impress. Over the past five years, the stock has returned 162% compared with an 87% gain for the S&P 500. Year to date, it’s up 12.03%, significantly outperforming the broader market’s 2.02% rise (read: Why Big Tech Stocks Are Powering Market Gains Again).Risk: Windows 11 Transition Faces ScrutinyWhile investor sentiment remains positive, Microsoft’s aggressive push to shift users from Windows 10 to Windows 11 has drawn criticism. This is because adoption rates lag behind expectations, and users have expressed growing concerns over hardware requirements, compatibility issues and enterprise readiness.As such, the Windows 11 transition is more of a strategic wildcard than any other or earnings threat.ETFs in Focus    iShares U.S. Technology ETF (IYW)iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and information technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 139 securities in its basket. Of these, Microsoft occupies the top position in the basket, with 15.9% of the assets. iShares U.S. Technology ETF has AUM of $19.9 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 894,000 shares a day. IYW has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. MSCI Information Technology Index ETF (FTEC)MSCI Information Technology Index ETF is home to 293 technology stocks with AUM of $13.1 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with a 15.1% allocation. MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 347,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.Vanguard Information Technology ETF (VGT)Vanguard Information Technology ETF manages about $87.9 billion in its asset base and provides exposure to 307 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 14.3% share. Vanguard Information Technology ETF has an expense ratio of 0.09%, while volume is solid at nearly 550,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.iShares Top 20 U.S. Stocks ETF (TOPT)iShares Top 20 U.S. Stocks ETF offers exposure to the potential growth of mega-cap stocks, which may benefit from their scale and resources. It tracks the S&P 500 Top 20 Select Index and holds 21 stocks in its basket, with MSFT taking the top spot at 14.7%. iShares Top 20 U.S. Stocks ETF has amassed $228.9 million in its asset base and charges 20 bps in annual fees. It trades in an average daily volume of 209,000 shares.Select Sector SPDR Technology ETF (XLK)Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $74 billion and an average daily volume of 6 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 69 securities in its basket, with Microsoft occupying the top position at 14.2%. Select Sector SPDR Technology ETF charges 8 bps in fees per year from investors. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: 6 ETFs to Invest in June).Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Technology Select Sector SPDR ETF (XLK): ETF Research Reports Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports iShares U.S. Technology ETF (IYW): ETF Research Reports Vanguard Information Technology ETF (VGT): ETF Research Reports iShares Top 20 U.S. Stocks ETF (TOPT): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks