Small-cap stocks are in the doghouse this year, which has led to small-cap ETFs facing one of their worst years in terms of outflows, according to FactSet data. Meanwhile, investors are flocking to the other side of the market-cap spectrum, buying up exposure to the megacaps that control benchmarks and headlines alike.
- SMH ETF has seen triple-digit price appreciation in the past five years. Check its prices live here.
The rotation isn’t necessarily unexpected. Ongoing interest rate pressures, international trade tensions, and decelerating domestic growth have held back smaller names. Megacaps, meanwhile, are enjoying fat balance sheets, international market access, and a technology-driven growth cycle that’s experiencing few signs of wear, particularly in AI and semiconductors.
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For those who want to play that trend, here are four megacap-oriented ETFs worth taking a closer look at.
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Vanguard Mega-Cap Growth ETF (NYSE:MGK): For pure-play exposure to the quickest-growing names in the biggest U.S. firms, MGK is tough to top. With an extremely low 0.07% expense ratio, the fund is skewed overwhelmingly in the direction of tech and consumer discretionary giants, which provides it with a growth profile turbocharged by the AI boom.
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Technology Select Sector SPDR Fund (NYSE:XLK): This ETF is laser-centered on tech giants—Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), and Nvidia Corp (NASDAQ:NVDA) control the roster. Its efficient, concentrated lineup means you won’t be distracted by smaller, less powerful names. That has worked out well, with XLK consistently being one of the top-performing sector ETFs over the past five years, achieving 136% gains.
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Vanguard Information Technology ETF (NYSE:VGT): For those seeking a more expansive universe, VGT broadens its net to encompass over 300 tech holdings. It retains significant market capitalization, including major holdings of Microsoft and Apple, while also capturing large-cap semiconductor and software companies that XLK excludes. The effect is a more diversified ride through the technology space, albeit with slightly higher expenses than XLK.
- VanEck Semiconductor ETF (NASDAQ:SMH): If AI is the megacap growth engine, semiconductors are the fuel. SMH's portfolio reads like a who's who of chipmaking royalty, Nvidia, Advanced Micro Devices Inc (NASDAQ:AMD), Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM). With roughly a 252% annualized return over the past five years, it's been a standout performer. Of course, that performance comes with volatility, but for those bullish on AI, automation, and digital infrastructure, SMH offers direct exposure to the backbone of it all.
The Bottom Line
Small caps can have their day once more, but 2025 is not shaping up to be that year. The market’s momentum, and hence the smart money, is currently with the giants. Megacaps are basking in the limelight, and these ETFs are the simplest way to take a front-row seat.
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