Seizing Tech ETF Opportunities: Finding Value Amid Market Volatility

The retail calendar has shifted consumer spending patterns this year, with shoppers pulling back significantly. According to Deloitte’s latest analysis, average holiday spending is projected to reach US$1,595—a 10% decline from 2024—as rising living costs and financial pressures force investors and consumers alike to hunt for undervalued assets. This budget-conscious environment extends beyond retail; it’s reshaping investment strategies as well.

Market Momentum Meets Valuation Concerns

Technology stocks experienced their most significant rally since May on November 24, 2025, fueled by speculation around potential Federal Reserve rate cuts. The Technology Select Sector SPDR Fund (XLK) has delivered a robust 20.6% gain year-to-date, though it remains down 6.5% over the past month—a reminder that even positive rallies don’t necessarily translate to smooth sailing. Any eventual rate cut could re-energize growth-focused sectors, but current market conditions warrant careful stock selection.

The AI Ecosystem’s Hidden Fragility

Recent developments in artificial intelligence financing have raised red flags among seasoned observers. Major players including NVIDIA and Microsoft have signaled plans to commit up to $15 billion toward OpenAI competitor Anthropic, highlighting an increasingly complex web of investments within the AI sector.

According to Karen McCormick, Chief Investment Officer at venture capital firm Beringea, this interconnectedness presents both opportunity and risk. The surge in circular financing within AI circles—where well-funded entities continuously reinvest in complementary companies—could amplify systemic vulnerability if sentiment shifts. McCormick cautioned that concentrated dependencies among major AI players might trigger broader market contagion during a potential downturn.

However, she acknowledged a stabilizing factor: these firms maintain exceptionally strong balance sheets and access to abundant capital, making outright collapse unlikely despite their elevated risk profiles.

Identifying Undervalued Tech Exposure

For value-conscious investors, the challenge lies in distinguishing between overpriced growth narratives and genuinely attractive opportunities. The broader iShares U.S. Technology ETF (IYW) trades at a P/E of 42.36X—well above the sector’s fundamental comfort zone. Several alternatives offer more reasonable valuations while maintaining tech exposure:

Invesco Next Gen Connectivity ETF (KNCT) – P/E: 20.98X – Lower valuation while capturing connectivity trends

Invesco S&P 500 Equal Weight Technology ETF (RSPT) – P/E: 22.74X – Equal-weighted approach reduces concentration risk

State Street SPDR S&P Software & Services ETF (XSW) – P/E: 22.99X – Software sector focus with disciplined pricing

State Street SPDR S&P Kensho Future Security ETF (FITE) – P/E: 23.16X – Emerging security technology exposure

Invesco AI and Next Gen Software ETF (IGPT) – P/E: 23.45X – Direct AI participation at moderate valuations

Strategic Timing in Uncertain Markets

The disconnect between market enthusiasm and underlying fundamentals suggests prudent timing for entry points. While AI and technology sectors remain compelling long-term themes, current valuations in flagship tech vehicles have decoupled significantly from historical norms. Investors adopting Karen McCormick’s cautionary perspective should prioritize ETFs with lower P/E multiples, broader diversification, and reduced exposure to potential AI market concentration.

The consumer spending pullback reflected in recent Deloitte data signals broader economic caution—a sentiment increasingly evident in equity markets. This environment rewards disciplined stock selection and valuation discipline, particularly within technology where narrative often outpaces fundamentals.