Tech Rally and Fund Closures Reshape ETF Investment Landscape in May 2025

Surging Tech Earnings Drive Gains in Key ETFs

The ETF market is experiencing renewed momentum in early May 2025, largely powered by bullish earnings reports from tech giants Microsoft and Meta Platforms. Microsoft’s shares surged nearly 9% after it reported robust fiscal Q3 results, while Meta gained 4.3% on better-than-expected Q1 performance and a commitment to higher capital expenditures focused on artificial intelligence. These results had an immediate ripple effect on tech-heavy ETFs.

One of the most notable gainers was the Invesco QQQ Trust (QQQ), which jumped 1.7%, reflecting the strength of its tech holdings. The SPDR S&P 500 ETF Trust (SPY) also benefited, buoyed by optimism across the broader market. With technology companies making up a large portion of both funds, investors are once again turning to these vehicles as indicators of sector performance and future growth opportunities.

According to Investors.com, this rally is a direct result of bullish investor sentiment following strong corporate results and strategic investment announcements. The continued push toward AI and cloud computing is expected to keep tech ETFs in focus through the rest of Q2.

Investor Rotation and Fund Closures Signal Market Caution

While technology is fueling growth, ETF investors are also showing signs of caution. The age-old adage “Sell in May and go away” is under consideration again in 2025, with some market strategists advising a shift toward more defensive sector ETFs. Funds such as the Consumer Staples Select Sector SPDR Fund (XLP) and Utilities Select Sector SPDR Fund (XLU) are being recommended as safer plays in anticipation of market pullbacks.

At the same time, passive core holdings like the Vanguard S&P 500 ETF (VOO) remain favored for long-term investors. ETF.com notes that balancing growth exposure with defensive strategies is becoming increasingly popular among financial advisors, especially in uncertain macroeconomic conditions.

Elsewhere, the ETF landscape is also adjusting through strategic fund closures. Simplify Asset Management recently announced it will shutter two of its offerings—the Simplify Market Neutral Equity Long/Short ETF (EQLS) and the Simplify Wolfe US Equity 150/50 ETF (WUSA)—effective May 23, 2025. The closures are based on recommendations from the investment adviser and reflect a broader trend of trimming underperforming or underutilized funds in a competitive space.

The growing popularity of ETFs among younger investors continues to influence the market as well. A report from The Australian reveals that individuals aged 25 to 34 are significantly more engaged in ETF trading compared to older demographics, especially in thematic sectors like technology, gold, and leveraged products.

Overall, the ETF space in May 2025 reflects a dynamic blend of risk-on optimism driven by tech and risk-off hedging amid economic uncertainty. These market shifts are shaping both short-term opportunities and long-term portfolio strategies for retail and institutional investors alike.