Baron Technology ETF

BCTK

Market cap $192M

Software appears undervalued by 34% versus historical averages, while other tech sub-sectors are greatly overvalued despite hardware's improved quality score. Baron Technology ETF is an actively managed, globally diversified technology ETF with a broad sector definition and high concentration in semiconductors. BCTK's high expense ratio, limited trading volumes, and short track record make it uncompelling for now.

SpaceX's $60 billion acquisition of AI startup Cursor strengthens its AI ambitions, boosts shares and puts SpaceX-heavy ETFs in focus.

During the first quarter, we initiated a position in Alphabet Inc., the parent company of Google and one of the world's most valuable technology franchises. We added to our position in Shopify Inc., the leading global operating system for commerce, after shares pulled back in a broader software sell-off. We exited our investment in Microsoft Corporation due to a combination of near-term execution shortfalls and longer-term structural concerns about its competitive positioning in AI.

Baron Technology ETF® declined roughly in line with its benchmark, the MSCI ACWI Information Technology Index. Top contributors were Lumentum Holdings Inc., Taiwan Semiconductor Manufacturing Company Limited, and Coherent Corp. Top detractors were Broadcom Inc., Amazon.com, Inc., and Tesla, Inc.

A tidal wave of conversions has siphoned an unprecedented amount of capital out of mutual funds and into the ETF wrapper. Last year's record 60 mutual-fund-to-ETF conversions in 2025 across 31 firms pushed total converted assets past $260 billion, and the past five years have now seen a grand total of 203 conversions.

Baron Capital continues to grow its active ETF lineup with today's introduction of Baron Risk Optimized Large Cap ETF™ (BROL). The ETF builds upon the firm's commitment to long-term growth investing with a targeted focus on U.S. large-cap companies that exhibit durable competitive advantages, significant growth opportunities, exceptional management teams, and compelling valuations.

Though new to the ETF market, Baron Capital is not new to investment management. The firm entered the ETF space last year, bringing its “old school active” philosophy to investors.

For many investors, technology exposure is synonymous with passive funds like Invesco QQQ Trust (QQQ). However, as the sector evolves and concentration risk in the Nasdaq-100 reaches historic levels, a more precise approach can be beneficial.

The Baron Technology ETF is an actively managed vehicle focused on "technology-related growth companies." BCTK has a much larger exposure to the growth factor than QQQM (i.e., a 30% weighted average forward revenue growth rate), which should contribute to its performance this year. However, I gravitate towards the neutral stance as the BCTK portfolio does not have a GARP tilt, and its 1.69 weighted average beta amplifies risks.

With regard to investing, artificial intelligence (AI) is often viewed as a monolith marked by a single, overwhelming wave of change. However, according to Michael Lippert, Head of Technology Research at Baron Capital, AI is better understood as “an onion” with many layers.