What sector has driven much of the U.S. stock market's gains over the past decade and now accounts for 34% of the S&P 500 and 63% of the Nasdaq-100? If you guessed technology, you're right.
While past eras of American growth were shaped by industries such as oil in the 1970s, manufacturing in the 1980s, and finance in the 1990s. The 2000s, following the dot-com bust and the 2008 financial crisis, have been defined by the resurgence and dominance of tech.
Investor interest has shifted from one theme to the next: cybersecurity, cloud computing, robotics, semiconductors and more. Some, such as the metaverse, proved fleeting. Others, including artificial intelligence (AI), continue to fuel massive research budgets and capital expenditures, reshaping not just markets but global competition.
Tech ETFs offer one of the simplest and most efficient ways to gain exposure to these trends, so long as you understand how they're constructed and perform.
How to pick the right tech ETF
If the 34% and 63% weightings of tech stocks in the S&P 500 and Nasdaq-100 aren't enough for your goals, you can use a narrower technology ETF to increase your exposure.
But doing so means stepping into the world of active investing. Narrower ETFs require more attention, longer due diligence, and a better understanding of what you're actually buying than a simple, broad-market index fund.
That's why it's important to match the specificity of the ETF to your investment objective. One helpful way to think about the tech ETF universe is in three tiers: sector-level, industry-level and thematic.
At the sector level, technology is one of the 11 sectors defined by the Global Industry Classification Standard (GICS), a widely adopted taxonomy used by major index providers such as S&P Dow Jones and MSCI.
Most broad tech ETFs follow this standard, and it generally includes what Wall Street analysts refer to as "tech": enterprise software firms, semiconductors, IT service providers and so on.
However, GICS doesn't always align with investor expectations. Some of the most well-known companies often thought of as tech – namely, Netflix (NFLX), Alphabet (GOOGL) and Meta Platforms (META) – aren't classified under the tech sector at all. Instead, they are tagged as communication services stocks and lumped together with traditional telecoms such as Verizon Communications (VZ) and AT&T (T).
Meanwhile, Tesla (TSLA) and Amazon.com (AMZN), despite their deep involvement in automation and cloud computing, respectively, are categorized as consumer discretionary stocks.
On the surface, Tesla sells cars and Amazon runs an e-commerce platform, but their business models include clear technology-driven components, such as autonomous vehicle software and cloud computing.
So, if an ETF markets itself as "tech sector," check whether it follows GICS classifications, as you might be surprised by which names are excluded.
If you're particularly bullish on one area of tech but more neutral on others, an industry-specific ETF can offer more targeted exposure than a broad sector fund. GICS divides the tech sector into five primary industry groups:
- IT services
- Software
- Communications equipment
- Technology hardware, storage & peripherals
- Electronic equipment, instruments & components
Drilling down on individual stocks, International Business Machines (IBM) sits under IT services, focusing on enterprise solutions and cloud infrastructure. Salesforce (CRM) and Oracle (ORCL) are software names offering cloud-based applications and databases.
In the equipment category, you'll find semiconductor stocks including Nvidia (NVDA) and Texas Instruments (TXN), as well as networking hardware producers like Cisco Systems (CSCO).
Just keep in mind that the narrower the ETF, the more likely it is to be concentrated in a handful of large names, so you'll need to weigh the benefits of focus against the risks of reduced diversification. This can be an issue in industries where one standout like Nvidia outperforms the others.
Lastly, there's the thematic approach. These ETFs aren't bound to GICS classifications and instead follow customized benchmarks designed to track specific trends. This flexibility is especially useful today, when companies increasingly operate across traditional sector lines. For example, a thematic AI-focused ETF may include:
- Semiconductor firms such as NVIDIA that supply the processing power
- Data center REITs that provide the storage backbone
- Software developers building large language models
Whether you choose a sector-based, industry-specific, or thematic ETF, it's always a good idea to check the index it tracks. Review the index's inclusion rules and definitions. That way, you won't be caught off guard when your "tech" ETF doesn't include a company you assumed would be there.
How we picked the best tech ETFs
We started by filtering for ETFs with expense ratios no higher than 0.45%. That's more than you'd typically pay for a broad-market index fund, but reasonable given the added specificity that tech-focused funds provide.
Even within the technology category, costs tend to rise as you move from sector-level to industry-specific to thematic strategies, so a little premium is expected, but we avoided funds that charged too much for that focus.
We also required a minimum $1 billion in assets under management (AUM). At this level, the risk of ETF closure is very low. Larger funds also tend to be more resilient in bear markets and better equipped to handle large inflows and outflows without disrupting performance.
Liquidity was another important screen. While many investors may hold tech ETFs as part of a long-term sector overweight, others use them for tactical trading, for example, during earnings season.
With that in mind, we only included exchange-traded funds with a 30-day median bid-ask spread of 0.10% or less, helping ensure tight execution for both buy-and-hold and active traders.
Finally, we stuck to ETFs that track an index. Passive products not only have lower fees but also offer full transparency. With an index ETF, you can easily visit the provider's site, download the methodology and understand how the fund is constructed.
That's not always the case with active ETFs, which rely heavily on a manager's discretion or a proprietary model, turning the strategy into more of a black box. For most investors, index-based ETFs offer the clarity and consistency that's easier to evaluate and build around.
- Assets under management: $83.9 billion
- Expense ratio: 0.08%
- 30-day median bid-ask spread: 0.00%
- 10-year annualized total return: 21.3%
The Technology Select Sector SPDR Fund (XLK) is part of SPDR's suite of 11 Select Sector ETFs, each tied to one of the GICS sectors within the S&P 500 universe. As the tech-sector option, XLK holds 68 large-cap U.S. tech stocks, but roughly 30% of its weight is concentrated in just three names: Microsoft (MSFT), Apple (AAPL) and Nvidia.
This ETF adheres strictly to GICS sector definitions, meaning popular companies such as Tesla, Amazon, Alphabet, Meta and Netflix are excluded. Investors wanting broader "tech-adjacent" exposure will need to complement XLK with ETFs from the consumer discretionary and communication services sectors.
Thanks to its size and long history, XLK is extremely liquid, widely traded and has listed options available. Its expense ratio has come down over time, and its dividend yield is just 0.6%, making it tax-efficient, but driven largely by capital appreciation.
Learn more about XLK at the State Street Investment Management provider site.
- Assets under management: $109.7 billion
- Expense ratio: 0.09%
- 30-day median bid-ask spread: 0.03%
- 10-year annualized total return: 21.6%
While ETFs such as XLK are limited to S&P 500 constituents and therefore include mostly large-cap stocks, the Vanguard Information Technology ETF (VGT) offers broader exposure to the entire U.S. tech sector, encompassing mid- and small-cap names, with 319 total holdings.
That said, VGT is still market cap-weighted, so its top three holdings of Nvidia, Microsoft and Apple remain the dominant positions, just at slightly lower weights than in XLK.
Vanguard has gradually lowered the ETF's expense ratio to 0.09%, making it cost-effective, though it's still a shade more expensive than XLK. It's also less popular with short-term traders due to a thinner options chain with fewer expiration dates and strike price choices.
Learn more about VGT at the Vanguard provider site.
- Assets under management: $7.1 billion
- Expense ratio: 0.41%
- 30-day median bid-ask spread: 0.02%
- 10-year annualized total return: 21.2%
The iShares Expanded Tech Sector ETF (IGM) helps address a common limitation of sector-pure ETFs like XLK and VGT by tracking the S&P North American Expanded Technology Sector Index. This benchmark broadens the definition of tech to include key communication services names such as Meta Platforms, Alphabet and Netflix.
However, IGM still falls short of full tech exposure, as it excludes major tech-driven companies classified under consumer discretionary, including Amazon and Tesla. It does offer a small dose of international diversification through select Canadian firms like Shopify (SHOP).
Performance and tax efficiency have been strong, but IGM's 0.41% expense ratio, over four times the cost of XLK and VGT, may give cost-conscious investors pause.
Learn more about IGM at the iShares provider site.
- Assets under management: $5.7 billion
- Expense ratio: 0.39%*
- 30-day median bid-ask spread: 0.09%
- 10-year annualized total return: 20.1%
The iShares Global Tech ETF (IXN) takes international diversification seriously, going far beyond IGM's token non-U.S. exposure. It tracks the S&P Global 1200 Information Technology 4.5/22.5/45 Capped Index, providing a portfolio of 120 holdings across developed and emerging markets.
The ETF is still market cap-weighted, so U.S. tech giants Microsoft, Apple and Nvidia remain dominant, but you also get meaningful exposure to global standouts.
Notably, IXN includes Taiwan Semiconductor Manufacturing (TSM) – the world's leading chip foundry – ASML Holding (ASML), a key supplier of lithography equipment, Europe's top enterprise software provider SAP (SAP) and Samsung Electronics, which is a major player in semiconductors, smartphones and displays.
That global reach comes at a cost. IXN charges a relatively high 0.39% expense ratio and has a wider 0.09% spread, making it more expensive to hold or trade compared to more liquid U.S.-focused options.
Learn more about IXN at the iShares provider site.
* The expense ratio on IXN was recently lowered to 0.39% from 0.41%.
- Assets under management: $26.5 billion
- Expense ratio: 0.35%
- 30-day median bid-ask spread: 0.01%
- 10-year annualized total return: 25.7%
Not all tech industries have delivered equally strong returns, but semiconductors have consistently outperformed, fueled by AI-related demand for GPUs, high-performance computing, and data center infrastructure. The VanEck Semiconductor ETF (SMH) has been one of the biggest beneficiaries of that trend.
The ETF offers exposure to mega-cap chipmakers Nvidia, Broadcom (AVGO) and Advanced Micro Devices (AMD), as well as equipment suppliers such as ASML and Applied Materials (AMAT), and foundries including Taiwan Semiconductor Manufacturing. It's the largest semiconductor-focused ETF on the market and one of the most actively traded.
However, the fund is heavily concentrated. Nvidia currently accounts for nearly 23% of the portfolio, with TSM at 11%. For investors concerned about single-stock risk, other ETFs in the category offer similar 0.35% expense ratios with capped or equal-weight exposure.
Learn more about SMH at the VanEck provider site.
