This tug-of-war between the two most valuable companies is getting interesting. After getting beaten by Nvidia (NVDA  ) in early June, Microsoft (MSFT  ) has gained the lead again, clinching the $3.5 trillion market cap crown, surging on cloud and AI-fueled gains. The rally is also boosting a list of tech ETFs that have double-digit exposure to the software giant.

AI Alpha Attracts ETF Flows

Microsoft's surge is sending ripples through the ETF universe. Here's a breakdown of the funds catching a ride on this trillion-dollar train:

iShares U.S. Technology ETF (IYW  )

  • MSFT weighting: 15.9% (top holding)
  • AUM: $20.1 billion
  • Expense ratio: 0.39%
IYW is heavy on software and electronics, which is perfect for tech purists and even for closet MSFT bulls.

Fidelity MSCI Information Technology Index ETF (FTEC  )

  • MSFT weighting: 15.1%
  • AUM: $12.9 billion
  • Expense ratio: 0.08%
Tracks the full tech shebang, with Microsoft holding the #2 spot.

Vanguard Information Technology ETF (VGT  )

  • MSFT weighting: 14.3%
  • AUM: $90.2 billion
  • Expense ratio: 0.09%
A beast in terms of size and liquidity, VGT offers you Microsoft and a smorgasbord of other tech giants.

AI + Azure = $$

Call it the co-pilot effect or Azure's turbo boost, but Microsoft has stormed back from April's dip, adding nearly $800 billion in market value, per Bloomberg. It now sits atop the global stock market food chain, edging out Nvidia, which briefly held the title last week.

The real fuel behind this lift? AI and the cloud. Microsoft's Intelligent Cloud segment jumped 21% in revenues last quarter, with Azure leading the charge. Analysts are drooling over the long-term potential of its OpenAI partnership, which is stitched into everything from productivity software to the broader enterprise AI stack.

Throw in a few bullish analyst calls - Goldman sees it at $550, Bernstein SocGen at $540 according to Investing.com - and you've got a stock that's not just surviving the tech sector's rollercoaster, it's driving it.

Valuation: Rich, But Justified

With a P/E (TTM) of 36.53 per Benzinga Pro, Microsoft isn't cheap, but then again, genius rarely is. But with consistent free cash flow and dominance in enterprise AI, analysts are giving MSFT a free pass...and then some.

Microsoft is no longer just a tech stock; it's an AI empire. And as it reclaims the $3.5 trillion throne, it's taking a fleet of ETFs along for the victory lap. If you're betting on the next wave of digital transformation, MSFT might just be your ticket, and these ETFs are your vehicle.