XLK vs. VGT: Here's Why State Street's Tech ETF Has The Edge
Key Points
Vanguard Information Technology ETF holds more stocks and commands larger assets under management than State Street Technology Select Sector SPDR ETF.
State Street's XLK has outperformed VGT over both the past year and five years.
Both ETFs have heavy exposure to Nvidia, Apple, and Microsoft, although XLK has slightly less than VGT.
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State Street Technology Select Sector SPDR ETF (NYSEMKT:XLK) and Vanguard Information Technology ETF (NYSEMKT:VGT) both target U.S. technology giants. However, VGT holds more stocks and has a greater asset base. XLK edges ahead on recent returns and remains marginally cheaper.
Both XLK and VGT aim to give investors focused exposure to the technology sector, tracking slightly different benchmarks and methodologies. This comparison looks at cost, performance, risk, and portfolio holdings to help you decide which might suit your priorities.
Snapshot (cost & size)
Both ETFs are similarly priced and offer modest yields, with State Street's (NYSE:STT) fund coming in just a hair more affordable.
| Metric | XLK | VGT |
|---|---|---|
| Issuer | State Street Investment Management | Vanguard |
| Expense ratio | 0.08% | 0.09% |
| 1-yr return (as of 2025-12-15) | 21.49% | 18.28% |
| Dividend yield | 0.5% | 0.4% |
| Beta | 1.23 | 1.26 |
| AUM | $92.8 billion | $130.0 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
Performance & risk comparison
| Metric | XLK | VGT |
|---|---|---|
| Max drawdown (5 y) | -33.55% | -35.08% |
| Growth of $1,000 over 5 years | $2,319 | $2,222 |
What's inside
Vanguard Information Technology ETF casts a wider net, holding over 320 stocks across the technology sector, with a small allocation to communication services and financials. Its top three holdings are Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT). These make up a substantial portion of assets, giving the portfolio a tilt toward mega-cap tech. The fund has an almost 20-year track record and manages $138.0 billion in assets under management, making it one of the largest sector ETFs available.
State Street Technology Select Sector SPDR ETF is even more concentrated in technology, with almost 99% sector exposure and a portfolio of around 70 holdings. Like VGT, its largest positions are Nvidia, Apple, and Microsoft.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Vanguard Information Technology ETF and State Street Technology Select Sector SPDR ETF are extremely similar. Their technology focus means they have both outperformed the S&P 500 in recent times. Even so, State Street's XLK has a slight edge over Vanguard's VGT performance-wise, generating better returns over the past year and the past five years. Its expense ratio is also very slightly lower.
The Vanguard ETF aims to track the MSCI US Investable Market Information Technology 25/50 Index, which contains a mix of U.S. IT companies of different sizes. State Street's fund is more targeted at large-cap companies as it is designed to track the technology sector of the S&P 500.
VGT looks more diversified because it holds more stocks and has a couple of non-tech companies. However, that's a little misleading as Nvidia, Apple, and Microsoft make up 45% of its holdings. XLK isn't much better -- the three giants account for 38% of its investments. That may be concerning for investors who worry that the AI rally can't last forever.
Glossary
ETF: Exchange-traded fund; a basket of securities traded on an exchange like a stock.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges its shareholders.
Assets under management (AUM): The total market value of assets a fund or investment manager oversees.
Dividend yield: Annual dividends paid by a fund or stock divided by its current price, expressed as a percentage.
Beta: A measure of an investment's volatility compared to the overall market, typically the S&P 500.
Drawdown: The peak-to-trough decline during a specific period for an investment, usually shown as a percentage.
Sector exposure: The proportion of a fund's assets invested in a particular industry or sector.
Benchmark: A standard index or measure used to compare the performance of a fund or investment.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.
Portfolio weighting: The percentage of a portfolio allocated to a particular asset, stock, or sector.
Mega-cap: Companies with extremely large market capitalizations, typically over $200 billion.
Track record: The historical performance or operational history of a fund or investment manager.
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Emma Newbery has positions in Apple and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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