BlackRock plans ETFs for big tech bulls and bears

BlackRock Inc. plans to put out a trio of exchange-traded funds that would allow investors to either go all-in on the biggest tech firms driving markets — or avoid them altogether.

The world’s largest asset manager on Wednesday filed for the iShares Nasdaq Top 30 Stocks ETF as well as the iShares Top 20 U.S. Stocks ETF, which, if launched, would offer exposure to the biggest stocks within the tech gauge and the S&P 500, respectively.

The firm also submitted paperwork for the iShares Nasdaq-100 ex Top 30 ETF, which would track an index composed of the 31st-largest to the 100th-largest companies by market value in the Nasdaq 100. That fund would conceivably allow investors to capture the boom in relatively smaller tech firms while avoiding the big behemoths.

BlackRock’s filings to the US Securities and Exchange Commission come at a time of intense debate over stock-market concentration risk, which has been brewing as just a handful of equities — dubbed the Magnificent Seven — led the charge higher in the first half of the year.

The seven companies — Tesla Inc., Apple Inc., Meta Platforms Inc., Nvidia Corp., Alphabet Inc., Amazon.com Inc. and Microsoft Corp. — accounted for the majority of gains in the S&P 500 and Nasdaq 100, which sparked fears among market-watchers that those same firms would also drag the market lower when they sell off, something that’s proven prescient in recent days.

“It speaks to the concentration dichotomy in the market,” said Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence. “You’re either all-in on a few names or avoiding them altogether.”

Tech stocks staged a speedy ascent in the first half of the year, with the Nasdaq 100 posting double-digit gains through the end of June thanks to surges in the likes of Nvidia and Microsoft, as well as other firms tied to artificial intelligence. Over the past month, however, they’ve experienced some of the biggest declines within a market-wide selloff that’s dragged down other asset classes as well.

During the first-half rally, many strategies tied to the big-tech behemoths became popular with investors. For instance, the Roundhill Magnificent Seven ETF (ticker MAGS) posted healthy inflows, said Todd Sohn, an ETF strategist at Strategas. Assets in the fund, which gives exposure to the seven largest companies, have grown to around $600 million from $35 million at the start of the year.

“It seems like issuers are either a) leaning into the concentration aspect or b) attempting to provide solutions away from it, and iShares, just being the leader in ETFs, is there to provide whatever solution investors want,” said Sohn, referring to BlackRock’s ETF unit.

Apart from MAGS, other exchange-traded products offer variations on big-tech exposure.

The Direxion Daily Concentrated Qs Bull 2X Shares (QQQU) and the Direxion Daily Concentrated QS Bear 1x Shares (QQQD) offer leveraged and inverse performance of an index tracking the Magnificent Seven, while two exchange-traded notes from REX Shares offer exposure to the NYSE FANG+ Index. Invesco, meanwhile, has a S&P 500 Top 50 ETF that’s gotten inflows of $1.3 billion this year.

Although there are already products out there tapping into the big-tech theme, there’s still room for new iterations, said Dave Mazza, chief executive officer at Roundhill Investments, which runs MAGS.

“Anytime you see the success of a product, other fund providers look to see how they can enter the space,” he said. “Being precise is beneficial, but there’s space for people looking for different measures of precision.”