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This article identifies and analyzes the six best tech ETFs that you can buy.
Best Tech ETFs
The definition of a “tech stock” continues to change as artificial intelligence expands into all sectors of the economy. However, these ETFs hold equities that capture the true essence of “technology”:
- Invesco QQQ Trust (QQQ)
- Vanguard Information Technology ETF (VGT)
- Invesco NASDAQ Next Gen 100 ETF (QQQJ)
- iShares Semiconductor ETF (SOXX)
- Global X Cybersecurity ETF (BUG)
- ARK Innovation ETF (ARKK)
Let’s examine these tech ETFs in more detail.
#1. Invesco QQQ Trust (QQQ)
- 1-Year Performance: -18%
- Expense Ratio: 0.20%
- Annual Dividend Yield: 0.45%
- AUM: $157 million
- 3 Month Avg. Volume: 77,000,000
- Number of Holdings: 103
- Inception Date: 1999
The Invesco QQQ ETF offers exposure to the illustrious Nasdaq 100 Index, which generally consists of the largest 100 technology stocks minus any financials.
When people broadly refer to how “tech” is performing, they’re probably looking at this fund.
QQQ is the second most traded ETF in the U.S. based on average daily trading volume, doing about 65M in daily trading volume. Without a doubt, it’s the most popular Nasdaq ETF.
QQQ has a healthy allocation to the FAAMG stocks. About 37% of the fund consists of these five stocks alone.
Big Tech is in its own category of the market now. These companies are charting new territories in terms of sheer size and continued revenue growth – finding historical comparisons has become trivial.
They are trillion-dollar companies that continue to grow revenues and create new revenue streams at a remarkable rate.
Their core business models are cash-generating machines, such as digital advertising, cloud computing, and various platform offerings supported by network effects.
But that’s enough about Big Tech – QQQ provides exposure to some stocks you may not immediately think of as “tech,” such as PepsiCo (PEP) and Costco Wholesale (COST).
In fact, Consumer Services and Consumer Discretionary make up a combined 34% of QQQ’s net assets.
Remember, companies must adopt the new technologies, or they wither away.
Additionally, Invesco launched a “mini QQQ” fund called the Invesco NASDAQ 100 ETF (QQQM) with the same exact holdings as QQQ but charges 0.15% instead of 0.20%.
This is for buy-and-hold investors that want lower fees and don’t necessarily need the liquidity of QQQ.
QQQ Top Holdings:
- Apple (AAPL) 13.32%
- Microsoft (MSFT) 10.53%
- Alphabet (GOOG, GOOGL) 7.55%
- Amazon.com (AMZN) 6.24%
- Tesla (TSLA) 4.10%
#2. Vanguard Information Technology ETF (VGT)
- 1-Year Performance: +2%
- Expense Ratio: 0.10%
- Annual Dividend Yield: 0.63%
- AUM: $41 billion
- 3 Month Avg. Volume: 828,000
- Number of Holdings: 396
- Inception Date: 2004
The Vanguard Information Technology ETFinvests in U.S. companies within the information technology sector.
VGT is perhaps the closest comparison to QQQ in terms of its investment objective and size, so we will use this section to compare them in greater detail.
For starters, QQQ has all the stocks that come to mind when you think of technology stocks, while VGT consists strictly of tech stocks within the information technology subsector.
That means that VGT does not hold Amazon, Alphabet, or Meta Platforms.
However, VGT does invest heavily in the Big Tech stocks that fit within its methodology. About 39% of VGT consists of two stocks: Apple and Microsoft.
And if you could only pick two FAAMGs to invest in over the last few years, it turns out that Apple and Microsoft were your best bets from a performance perspective.
Other differences between QQQ and VGT include the number and size of holdings. QQQ holds 100 stocks of only the large-cap type, while VGT holds +350 stocks mostly of the large-cap type and a few mid-caps and small-caps.
Last but not least: fees. Both are low-cost ETFs in the grand scheme of things, but VGT is half the price of QQQ, charging 0.10% compared to 0.20%.
However, 10 basis points probably shouldn’t be your breaking point when deciding between VGT and QQQ – they are different enough that their expense ratios shouldn’t be your primary deciding factor.
VGT Top Holdings:
- Apple (AAPL) 22.60%
- Microsoft (MSFT) 18.02%
- NVIDIA (NVDA) 4.34%
- Visa (V) 3.06%
- Mastercard (MA) 2.91%
#3. Invesco NASDAQ Next Gen 100 ETF (QQQJ)
- 1-Year Performance: -28%
- Expense Ratio: 0.15%
- Annual Dividend Yield: 0.30%
- AUM: $760 million
- 3 Month Avg. Volume: 313,000
- Number of Holdings: 99
- Inception Date: 2020
The Invesco NASDAQ Next Gen 100 ETF invests in the 100th – 200th largest companies in the Nasdaq Index.
Essentially, these are the hyper-growth companies that are “on deck” to join QQQ if they succeed and become large enough.
About 33% of Next Gen 100 companies eventually make it to the big leagues.
These are the equities that contribute outsized gains to QQQJ – hopefully so much so that they cancel out the underperformance of the stocks that “fail” for whatever reason.
QQQJ is a lottery to some degree, which is why the holdings are relatively equal-weighted across the board.
It’s not obvious which ones will outperform, so the fund manages risk by diversifying.
QQQJ Top Holdings:
- Enphase Energy (ENPH) 2.30%
- ON Semiconductor Corp. (ON) 2.03%
- CoStar Group (CSGP) 1.99%
- Coca-Cola Europacific Partners (CCEP) 1.96%
- Tractor Supply Company (TSCO) 1.95%
#4. iShares Semiconductor ETF (SOXX)
- 1-Year Performance: +14.13%
- Expense Ratio: 0.43%
- Annual Dividend Yield: 0.61%
- AUM: $6.4 billion
- 3 Month Avg. Volume: 1,200,000
- Number of Holdings: 32
- Inception Date: 2001
The iShares Semiconductor ETF provides exposure to U.S. companies that design, manufacture, and distribute semiconductors.
Semiconductors are the backbone of the technology sector and pretty much anything that requires computing, which is increasingly everything.
From iPhones to cars and cloud computing tobitcoin mining, chips have never been in higher demand.
We think of semiconductor stocks as the critical infrastructure for the tech sector. A classic pick-and-shovel investment strategy.
Computing power is the bottleneck on innovation for the best AI stockslike Alphabet and Microsoft – they can only go as far as their chips fromNVIDIA, AMD, and Intel allow them.
In addition to SOXX, other promising semiconductor ETFsinclude the VanEck Vectors Semiconductor ETF (SMH) and the SPDR S&P Semiconductor ETF (XSD).
SOXX Top Holdings:
- Intel Corp (INTC) 8.14%
- Broadcom (AVGO) 8.09%
- NVIDIA (NVDA) 7.89%
- Texas Instruments (TXN) 6.60%
- Advanced Micro Devices (AMD) 5.74%
#5. Global X Cybersecurity ETF (BUG)
- 1-Year Performance: -12%
- Expense Ratio: 0.50%
- Annual Dividend Yield: 0.07%
- AUM: $1.1 billion
- 3 Month Avg. Volume: 340,000
- Number of Holdings: 30
- Inception Date: 2019
The Global X Cybersecurity ETF invests in cybersecurity technology companies, specifically those whose principal business is to develop and manage security protocols preventing intrusion and attacks to systems, networks, apps, computers, and phones.
Global X forecasts that the global cybersecurity market could grow from $180 billion in 2021 to $370+ by 2028.
CrowdStrike, a leading firm in the industry and one of the top cybersecurity stocks, tends to agree.
Total cloud IT spending is expected to reach $217.7 billion in 2023, but only 0.9% of that will be spent on cloud security.
This is substantially less than the guidance published by the International Data Corp (IDC), which recommends organizations spend between 5% and 10% of their IT budget on security.
That’s a 5x to 10x mispricing. We expect that gap to close as more companies realize that they’re insufficiently protected from the threats that exist in cyberspace.
The cybersecurity bet is another second-order play on the larger cloud computing and digitization trends.
We expect the demand for cybersecurity to exponentially increase as a larger percentage of people’s lives are spent online, and as a larger percentage of businesses are operated online,
BUG Top Holdings:
- Fortinet (FTNT) 6.97%
- Check Point Software Technologies (CHKP) 6.64%
- CrowdStrike (CRWD) 6.41%
- Palo Alto Networks (PANW) 6.19%
- Okta (OKTA) 5.73%
#6. ARK Innovation ETF (ARKK)
- 1-Year Performance: -62%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 1.74%
- AUM: $9.0 billion
- 3 Month Avg. Volume: 33,000,000
- Number of Holdings: 36
- Inception Date: 2014
The ARK Innovation ETF invests in “disruptive innovation,” which it defines as introducing a technologically enabled new product or service that potentially changes the way the world works.
ARK Invest has six ETFs that focus on these disruptive trends in various industries, but ARKK is its flagship ETF that invests across all of them.
This includes areas like cloud computing, autonomous driving, biotech, blockchain technology, space exploration, and more.
These companies have ambitious goals, and with that comes lofty valuations. ARK is notorious for its interest in hyper-growth stocks like Tesla and Zoom.
Please note that this is an active ETF, and therefore its core holdings are vulnerable to daily changes. The active structure is also why the expense ratio is so high.
Consider one of the other ARK ETFs if you’re seeking narrow exposure to a specific disruptive theme: the ARK Space Exploration & Innovation ETF(ARKX), the ARK Genomic Revolution ETF (ARKG), or the ARK Autonomous Technology & Robotics ETF (ARKQ).
ARKK Top Holdings:
- Zoom Video (ZM) 9.65%
- Tesla (TSLA) 8.34%
- Roku (ROKU) 8.11%
- CRISPR Therapeutics (CRSP) 5.34%
- Teladoc Health (TDOC) 5.03%
Best Tech ETFs: Alternatives
The ETFs below are more thematic in nature than your average tech fund. Here are some of our favorites:
- First Trust Cloud Computing ETF (SKYY)
- Global X Robotics & Artificial Intelligence ETF (BOTZ)
- iShares Global Tech ETF (IXN)
- Global X Internet of Things ETF (SNSR)
- SPDR S&P Semiconductor ETF (XSD)
- ARK Next Generation Internet ETF (ARKW)
- iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)
- Global X Blockchain ETF (BKCH)
- ARK Autonomous Technology & Robotics ETF (ARKQ)
There’s no shortage of AI, cloud computing, and robotics ETFs on the market.
Best Tech ETFs: Frequently Asked Questions
What is the best performing tech ETF?
The best performing tech ETF is the Invesco QQQ ETF (QQQ). It is actually the #1 highest-rated large-cap growth fund (1 of 317) based on total returns over the past 15 years.
Which is better: QQQ or VGT?
We believe that QQQ captures the performance of tech stocks better than VGT. QQQ consists of the top 100 stocks in the tech-heavy Nasdaq 100 Index, whereas VGT holds 350 equities exclusively in the information technology industry, which doesn’t include the likes of Alphabet or Amazon.com, among other notable names.
What is a good tech index fund?
We recommend owning a good tech ETF instead of a tech index fund because they are more cost-effective and are more liquid. A tech ETF like QQQ, VGT, QQQJ, QQQM, ARKK, or SOXX are good places to start.
Bottom Line: Best Tech ETFs
Tech stocks were in a raging bull market for the last decade – any one of these ETFs would have delivered exceptional returns.
The million-dollar question is which will outperform in the decade to come.
Keep Reading:
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best technology ETFs.
This article was updated on July 16th, 2022 to reflect changes in each fund’s performance, holdings, assets under management, and other relevant information.
