In early 2026, US technology fund flows have shown a significant divergence between broad market indices and specific sector ETFs as investors rotate away from highly concentrated mega-cap names. While the broader ETF market saw record net inflows of $156 billion to $166 billion in January 2026, the pure-play technology sector experienced notable pressure.
Key Technology Fund Flows (USD)
Broad Tech (QQQ): The Invesco QQQ Trust, which tracks the Nasdaq-100, managed to maintain positive momentum with $520.99 million in net inflows over the last month (as of February 6, 2026). However, it recorded short-term outflows of $1.91 billion in the first week of February.
Sector-Specific (XLK): The Technology Select Sector SPDR Fund has faced a sharp reversal, recording $1.33 billion in net outflows over the past month. For the week ending February 10, 2026, it saw an additional $391.53 million exit the fund.
Communication Services (XLC): This tech-adjacent sector also saw weekly outflows of $411.56 million.
Specialised Growth: Despite the broader sector retreat, retail inflows into software stocks hit record highs in early February 2026, driven by continued implementation of AI technologies.
Market Sentiment and Drivers
Rotation to Value: Investors are increasingly shifting capital toward international equities and dividend-focused ETFs. International equity ETFs pulled in a record $68 billion in January 2026, outpacing US equity inflows for the first time in three years.
Concentration Risks: The "Magnificent Seven" stocks have faced selling pressure, with the Roundhill Magnificent Seven ETF down over 3% year-to-date as of February 2026.
Institutional Shift: Large tech firms like Meta, Alphabet, and Amazon are increasingly turning to public bond markets to finance AI expansion rather than relying solely on cash flows, leading to a massive issuance of AI-linked bonds estimated to reach $1–$3 trillion in the coming years.
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