Since an 8-for-1 stock split in April, Vanguard's Information Technology ETF (VGT) has sharply outpaced the performance of the firm's larger growth-focused funds, underscoring the market's continued appetite for artificial intelligence hardware and software plays.
As of late Friday morning in New York, VGT traded at $120.68, well ahead of the Vanguard Growth ETF (VUG) at $89.51 and the Vanguard Mega Cap Growth ETF (MGK) at $91.16. The split, effective April 21, increased the number of shares outstanding while reducing the per-share price, leaving investors' economic stake unchanged.
The outperformance is not a result of the split itself but of VGT's concentrated exposure to the AI trade. The fund's top three holdings—Nvidia, Apple, and Microsoft—account for over 40% of its portfolio. Nvidia alone represents approximately 18.59%, Apple 14.81%, and Microsoft 10.01%. In contrast, VUG and MGK, while also holding large tech names, are broader growth ETFs with less concentrated exposure to information technology.
Investors have continued to pour money into AI hardware and software, benefiting VGT's pure-play approach. The ETF's tilt toward semiconductors, hardware, software, and IT services has allowed it to capitalize on strong demand for AI servers. Dell Technologies, for instance, raised its annual AI server revenue forecast to around $60 billion after first-quarter revenue surged 88% to $43.84 billion, fueled by robust demand for Nvidia-based servers. Dell COO Jeff Clarke noted on a post-earnings call that the company is "repricing, it feels like, every day" amid tight supply and cost conditions for AI hardware.
Nvidia's global expansion is also evident. CEO Jensen Huang, speaking in Taiwan ahead of Computex, indicated the company could invest up to $150 billion annually in the region. Ryan Fletcher, a McKinsey & Company partner, described Taiwan's role as "moving from a semiconductor story to an infrastructure story."
The 8-for-1 split has also made VGT more accessible for options strategies. The reduced per-share price lowered the cost of selling a covered call from over $80,000 to roughly five figures, with 100 shares of VGT costing about $12,068 on Friday. However, the concentration risk remains significant. Heavy weightings in Nvidia, Apple, and Microsoft mean the fund is vulnerable to sharp declines if those stocks reverse. Covered calls can limit upside gains, and while premiums provide some income, they do not offer protection against rapid downturns.
For now, the market's focus remains on AI infrastructure, and VGT's tight alignment with that theme has drawn more investor attention than Vanguard's broader growth ETFs. The split changed how the fund trades, but the underlying risks and rewards are unchanged.
