Should You Buy the Vanguard Information Technology ETF Despite Its All-Time High?

The Vanguard Information Technology ETF has surged 46% since April, reaching an all-time high of $686 per share. While buying at record prices can be risky, history suggests that investing in funds like VGT at any time can lead to positive long-term returns, even if the market experiences a downturn. Investors should consider a long-term strategy to protect their portfolios and take advantage of future market trends.

The Vanguard Information Technology ETF (VGT) has surged 46% since April, reaching an all-time high of $686 per share. This remarkable performance has drawn significant investor attention, but buying at record prices can be risky. Understanding the risks and rewards associated with VGT is crucial for investors considering a long-term strategy.

VGT has consistently outperformed the S&P 500, delivering a 22.6% annualized return over the past decade compared to the S&P’s 13.2% [1]. In 2025, VGT’s total return is 18.1% year-to-date, outpacing the S&P 500’s 16%. Its focus on the tech sector, particularly AI-driven giants, has fueled this dominance, attracting investors seeking growth. However, VGT’s stellar performance masks significant risks tied to its heavy concentration in a few mega-cap tech stocks.

VGT tracks the MSCI US Investable Market Information Technology 25/50 Index, holding 320 stocks but heavily weighted toward its top holdings. The top 10 companies—Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and others—account for over 60% of the ETF’s assets, with Apple (18.1%), Microsoft (14.2%), and Nvidia (10.7%) alone comprising 43% of the portfolio [1]. These firms, deeply entrenched in the AI revolution, have driven VGT’s gains, propelled by soaring demand for AI infrastructure and software.

However, this concentration amplifies risk. The S&P 500’s rally this year is increasingly driven by just a few tech giants, with the top five stocks accounting for 80% of the index’s gains. VGT, even more concentrated than the S&P, faces similar dangers. If these leaders stumble—due to regulatory scrutiny, earnings misses, or AI hype cooling—the ETF could face significant volatility.

VGT’s sector-specific focus makes it less diversified than the S&P 500, amplifying its sensitivity to tech sector shocks. Regulatory risks loom large, with antitrust probes targeting Apple and Microsoft, while Nvidia faces scrutiny over AI chip dominance. Geopolitical tensions, such as U.S.-China trade relations, could disrupt semiconductor supply chains, impacting VGT’s 25% allocation to chipmakers.

While VGT’s low expense ratio of 0.1% is attractive, it doesn’t offset the risk of a concentrated portfolio in a potentially overbought sector. Historical corrections, like the 2000 dot-com bust, saw tech-heavy funds drop over 40%. With VGT’s beta of 1.2, it’s poised for sharper declines than the broader market in a downturn.

Investors should consider a long-term strategy to protect their portfolios and take advantage of future market trends. While both VGT and the S&P 500 rely heavily on a few tech titans, VGT’s concentrated tech exposure heightens its vulnerability in a narrowing market. With valuations stretched and economic uncertainties mounting, VGT may be too risky for cautious investors, despite its impressive track record.

References:
[1] https://247wallst.com/investing/2025/07/24/is-this-vanguard-etfs-rally-too-good-to-last-why-this-tech-fund-could-crash/