Bank of America recently turned bullish on large-cap growth ETFs in its latest 2025 outlook. It changed ratings for more than a dozen funds, including initiating coverage on 14 growth ETFs and refreshing the ratings on five others. Overall, a total of 8 ETFs earned its highest rating.

The upgrade comes at a time when tech, mega-caps and AI stocks have dominated the market since 2023. Concentration at the top of the S&P 500 is reaching unprecedented highs and the magnificent 7 continue driving the S&P 500’s gains. Despite high valuations, Bank of America feels that improved balance sheet quality and revenue growth could keep the rally going.

Biggest U.S. Large Cap Growth ETFs

  • Invesco QQQ ETF (QQQ)
  • Vanguard Growth ETF (VUG)
  • iShares Russell 1000 Growth ETF (IWF)
  • iShares S&P 500 Growth ETF (IVW)
  • Invesco Nasdaq 100 ETF (QQQM)

It also comes at a time when the markets are weighing additional risks, including a government shutdown, weaker labor market and jobs data and possible fatigue from three years of nearly uninterrupted gains in the S&P 500.

Large-cap growth ETFs such as VUG and SCHG have captured massive inflows as investors chase AI-driven earnings momentum.

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Bank of America, however, notes:

“We upgrade our category view of U.S. large-cap growth ETFs from Neutral to Favorable,” the bank wrote, citing “continued outperformance versus other factors, strong inflows, and a mature product suite.”

Bank of America

While diversification remains a key long-term, the report suggests that growth stocks and growth ETFs are likely to drive the return in modern portfolios.

Quick Take on Bank of America ETFs

  • Bank of America raises its view on U.S. large-cap growth ETFs to “Favorable”.
  • 8 ETFs earned the bank’s highest rating.
  • Concentration in the S&P 500 and elevated valuations are key risks.

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How Bank of America’s ETF Ratings Really Work

In its model, Bank of America assigns two values to an ETF:

Specific fund view

  • 1 = more attractive
  • 2 = attractive
  • 3 = less attractive

Category outlook

  • FV = favorable
  • NV = neutral
  • UF = unfavorable

Scores are derived from a number of factors, including ROA, ROE, valuation, earnings growth and expense ratios.

The best ETFs would earn a “1-FV” rating, while the worst would get a “3-UF”.

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Why Bank of America’s Outlook Shift Could Redefine the Growth Trade

In its report, Bank of America gave the highest “1-FV” rating to 8 large-cap growth ETFs.

  • T. Rowe Price Blue Chip Growth ETF (TCHP)
  • T. Rowe Price Growth Stock ETF (TGRW)
  • Schwab U.S. Large-Cap Growth ETF (SCHG)
  • iShares Morningstar Growth ETF (ILCG)
  • Vanguard Mega Cap Growth ETF (MGK)
  • Fidelity Blue Chip Growth ETF (FBCG)
  • Vanguard Growth ETF (VUG)
  • Harbor Long-Term Growers ETF (WINN)

Of this group of eight, SCHG maintained its rating, VUG was upgraded and the remaining six were all initiated at this rating.

The full list of 19 ETFs can be viewed here:

source: Bank of America

Large Cap Growth ETFs That Didn’t Impress Bank of America

Not every ETF was rated well by Bank of America. The group as a whole was given a “Favorable” rating, but four ETFs were dinged with a “Less Attractive” rating.

  • Capital Group Growth ETF (CGGR)
  • First Trust Large Cap Growth AlphaDEX ETF (FTC)
  • Invesco S&P 500 Pure Growth ETF (RPG)
  • Pacer Trendpilot 100 ETF (PTNQ)

These ETFs scored lower on valuations, momentum or balance sheet health.

Where Bank of America Still Sees Trouble Lurking in the Market

Even in its upgrade of the large-cap growth ETF sector, Bank of America noted several risks facing the S&P 500 and the U.S. stock market as a whole.

  • Top 10 stocks now account for 40% of the S&P 500, the highest ever: The last few years have led to an historically high concentration of mega-cap tech and growth stocks at the top of the S&P 500 and Nasdaq 100. Those kinds of concentration bubbles tend to unwind eventually, as they did during the tech bubble.
  • The S&P 500 trades at 31x earnings, double the S&P 500 average: Historically high valuations in U.S. stocks, but especially growth stocks, could shrink quickly in an economic downturn. Overall improved balance sheet quality, however, could help justify some of the current valuations.
  • S&P 500 value stocks trade at just 23x earnings: After a boom in tech/AI earnings, earnings growth could begin spreading out across the economy. This could give a boost to value and non-tech stocks going forward.

Key takeaways from Bank of America

  • Bank of America upgrades its outlook for the U.S. large-cap growth ETF sector to “Favorable”.
  • 8 growth ETFs were given the bank’s highest rating.
  • High index concentration and valuations are potential risks.
  • Value stocks could outperform if earnings growth spreads out.

Bank of America Is Still Bullish On Growth Stocks

Despite years of strong gains and outperformance, Bank of America still likes large-cap growth stocks and ETFs.

Not all large-cap growth ETFs are equal, however, and this report emphasizes the need for research and selectivity when choosing the best ETFs.

Choosing the best ETF could make the difference in who outperforms and who gets left behind.