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Vanguard Information Technology Index Fund ETF Shares

VGT:NYSEArca

equity ETF | passive | Vanguard | Tracks MSCI

Market Price

US$760.43 (26 Jan 2026)

+25.33% (YoY)

NAV

US$754.92

+0.73% Premium

Yield

0.40%

0.00% (YoY)

Expense Ratio

0.09%

-93% vs Avg: 1.26%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF offers exposure to the U.S. information technology sector, tracking the performance of a benchmark index comprising large, mid-size, and small U.S. technology companies. It is a highly efficient vehicle for diversified tech exposure, evidenced by its low expense ratio and strong historical returns. Wall Street analysts project a significant upside for its underlying holdings, with an average target price of US$969.76 for the ETF, suggesting a bull case NAV of approximately US$981.40 (+30%) and a bear case NAV of around US$603.94 (-20%) over the next 12-18 months.

⚖️ Risk vs Reward

The underlying technology holdings trade at an aggregate P/E of 38.6x and P/B of 8.9x, representing a premium valuation compared to the broader market and historical averages, largely driven by enthusiasm for artificial intelligence and strong earnings from mega-cap tech. This sector has consistently outperformed the S&P 500, but its concentrated nature (top 10 holdings represent ~59% of assets) poses a significant concentration risk. The potential for continued innovation and earnings growth underpins the bull case, while regulatory headwinds, interest rate sensitivity, and valuation compression present downside risks, creating an asymmetric risk/reward profile for investors seeking concentrated growth exposure.

🚀 Why VGT Could Soar

• Continued robust growth in artificial intelligence adoption and infrastructure spending, driving demand for semiconductor and software solutions.
• Strong earnings performance and free cash flow generation from mega-cap technology holdings, supporting higher valuations.
• Innovation cycles in cloud computing, cybersecurity, and enterprise software creating new revenue streams and expanding market opportunities for underlying companies.

⚠️ What Could Go Wrong

• Intensified regulatory scrutiny and antitrust actions against large technology companies, impacting their growth prospects and business models.
• A slowdown in global economic growth or rising interest rates disproportionately affecting growth stocks and leading to valuation compression in the tech sector.
• Increased competition and technological disruption from emerging players, challenging the market dominance and profitability of current leaders.

🏢 Fund Overview

What Are You Actually Buying

The technology sector comprises companies involved in software development, hardware manufacturing, semiconductor production, IT services, and internet platforms, serving as a primary driver of innovation and economic growth.
Companies in this space are characterized by rapid product cycles, significant research and development investments, and a strong emphasis on intellectual property. They often exhibit higher growth rates and profitability margins than traditional industries.
The sector is typically growth-oriented, with a focus on capital appreciation rather than dividend income, and includes diverse sub-industries from enterprise software to consumer electronics and advanced computing.

Market Dynamics & Outlook

The technology sector currently trades at a premium valuation due to strong secular tailwinds, including ongoing digital transformation and the burgeoning AI revolution.
Demand for cloud services, advanced semiconductors, and cybersecurity solutions continues to accelerate, underpinning robust revenue and earnings growth for many constituents.
Despite positive drivers, the sector faces potential headwinds from increasing global regulatory oversight and persistent inflationary pressures that could impact consumer and enterprise spending.
Geopolitical tensions and supply chain vulnerabilities, particularly in semiconductor manufacturing, also present ongoing risks to the sector's stability and growth trajectory.

🎯 Why This Matters

Understanding the technology sector's current dynamics is crucial as it represents a significant portion of the broader market and is central to future economic expansion. The sector's sensitivity to macroeconomic factors and innovation cycles means investors must weigh its substantial growth potential against inherent volatility and concentration risks.

📈 Valuation & Analysis

Historical Performance

YTD

+0.18%

+21.78%

Yearly Growth (3Y)

+33.95%

Yearly Growth (5Y)

+17.12%

Yearly Growth (10Y)

+22.55%

Yearly Growth (Since Inception)

+14.06%

Current Valuation

As of December 31, 2025, the Vanguard Information Technology ETF's underlying holdings collectively trade at a price-to-earnings (P/E) ratio of 38.6x and a price-to-book (P/B) ratio of 8.9x. These metrics reflect a premium valuation compared to the broader market, which has been sustained by strong earnings growth and significant investor enthusiasm for technology, particularly in areas like artificial intelligence. The current dividend yield stands at a modest 0.40%, indicating the fund’s growth-oriented nature where earnings are largely reinvested rather than distributed. This valuation, while elevated, is supported by robust profitability and strong free cash flow generation from the fund's top constituents.

The Bull Case - Upside to

Accelerated AI Adoption & Spending

Medium Probability

If enterprise AI adoption accelerates beyond current expectations, driving an additional 5-7% revenue growth for top holdings, this could push the ETF's NAV towards US$981.40 (+30%) over 12-18 months.

Sustained Earnings Outperformance

High Probability

Consistent earnings beats and upward revisions from key technology companies could lead to multiple expansion, potentially increasing NAV to US$945.00 (+25%).

Favorable Macroeconomic Environment

Medium Probability

Lower interest rates and robust economic growth could fuel technology spending and investor risk appetite, leading to a 15-20% uplift in valuations across the sector.

The Bear Case - Downside to

Valuation Compression & Market Correction

Medium Probability

Elevated P/E ratios in the tech sector are vulnerable to a market correction or rising interest rates, which could compress multiples by 15-20%, driving the ETF's NAV down to US$640.00 (-15%).

Increased Regulatory Headwinds

Medium Probability

Stricter antitrust enforcement or new data privacy regulations globally could constrain growth for mega-cap tech, potentially reducing sector earnings by 10-15%.

Geopolitical Tensions & Supply Chain Disruptions

Low Probability

Escalating geopolitical conflicts or persistent supply chain issues, especially in semiconductor manufacturing, could severely impact production and profitability, leading to a 20-25% decline in NAV.

Risk/Reward Assessment

The Vanguard Information Technology ETF presents a compelling risk/reward profile for investors seeking exposure to the innovation and growth within the U.S. technology sector. The bull case is primarily driven by the ongoing secular trends in artificial intelligence, cloud computing, and digital transformation, which are expected to continue fueling strong earnings and cash flow generation from the fund's highly concentrated holdings. Should these trends accelerate, the fund could see significant upside. However, the elevated valuations and concentration risk in a few mega-cap names introduce material downside potential. A shift in macroeconomic conditions, such as sustained higher interest rates, or increased regulatory pressures could lead to significant valuation compression. While the long-term outlook for technology remains robust, investors should be mindful of the potential for short-to-medium term volatility and consider a dollar-cost averaging approach to mitigate entry timing risk in the current market environment.

Peer Comparison

• VGT offers a highly competitive expense ratio of 0.09%, significantly lower than many actively managed or broader tech-focused peers like QQQ. • It provides targeted exposure to the pure U.S. information technology sector, excluding certain communication services or consumer discretionary components often found in broader tech-heavy ETFs. • The fund boasts substantial assets under management, contributing to excellent liquidity and tight bid-ask spreads, making it highly efficient for trading. • While VGT generally has a strong performance record, its high concentration in top holdings may lead to less diversification compared to broader market ETFs like VOO.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Technology Select Sector SPDR Fund (XLK)	0.08%	US$72.0B	15.00%	27.90%	17.10%	0.01%
Invesco QQQ Trust (QQQ)	0.18%	US$407.2B	18.00%	29.92%	14.12%	0.00%
Vanguard S&P 500 ETF (VOO)	0.03%	US$407.9B	17.84%	22.97%	14.38%	0.01%

🎯 Why This Matters

The detailed valuation and peer comparison reveal that VGT offers a highly efficient and concentrated play on the U.S. technology sector. Its premium valuation is largely justified by the strong fundamentals of its holdings, but investors must acknowledge the inherent risks associated with such concentration and market sensitivity. For long-term growth-oriented portfolios, VGT can be a core holding, but its performance should be continually assessed against the evolving macroeconomic landscape and technological advancements.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	NVDA	N	NVIDIA Corp	Technology	17.3%
2	MSFT	M	Microsoft Corp	Technology	13.8%
3	AAPL	A	Apple Inc	Technology	13.1%
4	AVGO	B	Broadcom Inc	Technology	4.3%
5	ORCL	O	Oracle Corp	Technology	2.0%
6	PLTR	P	Palantir Technologies Inc	Technology	1.9%
7	CSCO	C	Cisco Systems Inc	Technology	1.5%
8	AMD	A	Advanced Micro Devices Inc	Technology	1.4%
9	CRM	S	Salesforce Inc	Technology	1.3%
10	IBM	I	International Business Machines Corp	Technology	1.2%

Fund Mechanics

How It Works

The Vanguard Information Technology Index Fund ETF employs a passive, indexing investment approach designed to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. This benchmark comprises U.S. companies of all market capitalizations within the information technology sector, as classified under the Global Industry Classification Standard (GICS). The fund aims to replicate the index by investing all, or substantially all, of its assets in the constituent stocks in approximately the same proportion as their weighting in the index. A full-replication strategy is primarily used, but a sampling strategy may be employed if regulatory constraints prevent full replication to approximate the index’s key characteristics. The index is rebalanced on a quarterly basis, ensuring the portfolio remains aligned with its target exposure.

Holdings Breakdown

Number of Holdings

320

Top 10 Concentration

5881.0%

Top 20 Concentration

7000.0%

Turnover Rate

780%

Category	Weight	Description
Technology	98.3%
Communication Services	0.8%
Financial Services	0.5%
Industrials	0.4%
Basic Materials	0.0%
Healthcare	0.0%

Cost Efficiency

Expense Ratio

0.09%

Median Bid-Ask Spread

0.030%

Metric	1 Year	3 Year	5 Year
Tracking Error	N/A	N/A	N/A
Tracking Difference	-0.12%	-0.07%	-0.09%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	21.78%	21.90%	-0.12%	N/A	N/A	N/A
2024	29.27%	29.38%	-0.11%	N/A	N/A	N/A
2023	52.67%	52.64%	0.03%	N/A	N/A	N/A
2022	-29.67%	-29.58%	-0.09%	N/A	N/A	N/A
2021	30.38%	30.49%	-0.11%	N/A	N/A	N/A

Annualized Return Since Inception

14.06%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
XLK	Technology Select Sector SPDR Fund	State Street	0.08%	US$72.0B	15.0%	27.9%	17.1%	0.01%	17.85%	1.59	N/A
QQQ	Invesco QQQ Trust	Invesco	0.18%	US$407.2B	18.0%	29.9%	14.1%	0.00%	15.35%	1.83	N/A
VOO	Vanguard S&P 500 ETF	Vanguard	0.03%	US$407.9B	17.8%	23.0%	14.4%	0.01%	11.79%	1.55	N/A
Category Average			1.26%	—	24.3%	49.7%	31.6%	0.00%	—	1.08	—

Risk Metrics

Beta

1.29

Alpha

7.43

R-Squared

62.89

Standard Deviation

1 Year	3 Years	5 Years	10 Years
19.77%	18.43%	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
0.63	1.43	0.66	0.97

Sortino Ratio

3 Years	5 Years
2.27	1.04

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
-12.69%	N/A	N/A	-54.63%

Upside Capture

13800.0%

Downside Capture

10000.0%

Correlations

S&P 500

0.97

Liquidity & Trading

Volume

Avg Daily Shares

551,109

Avg Daily Dollar Volume

US$419.0M

Trend

increasing

Bid-Ask Spread

Metric	Value
Median (Percent)	0.030%
Median (Dollar)	N/A
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	0.01%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

stable

Net Flows

Period	Net Flow

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.