Tech ETFs: XLK Offers Lower Fees While IYW Provides Broader Tech Exposure
Key Points
iShares U.S. Technology ETF manages more than double the number of holdings found in State Street Technology Select Sector SPDR ETF.
State Street Technology Select Sector SPDR ETF maintains a significantly lower expense ratio and higher dividend yield than the iShares alternative.
iShares U.S. Technology ETF includes Alphabet among its top holdings whereas State Street Technology Select Sector SPDR ETF concentrates on Nvidia and Apple.
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State Street Technology Select Sector SPDR ETF (NYSEMKT:XLK) offers lower costs and higher yields, while iShares U.S. Technology ETF (NYSEMKT:IYW) provides broader exposure and includes communications giants like Alphabet.
Tech investors often choose between narrow sector focus and broader industry exposure within the tech landscape. While both funds target U.S. technology companies, their underlying index rules lead to distinct concentrations. For those evaluating these two technology titans, the choice often hinges on whether to include the diverse digital advertising and services segments found in the broader tech index.
Snapshot (cost & size)
| Metric | XLK | IYW |
|---|---|---|
| Issuer | SPDR | iShares |
| Expense ratio | 0.08% | 0.38% |
| 1-yr return (as of April 27, 2026) | 54.90% | 53.70% |
| Dividend yield | 0.50% | 0.10% |
| Beta | 1.30 | 1.33 |
| AUM | $104.3 billion | $21.4 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The State Street fund is more affordable, maintaining an expense ratio of 0.08% compared to the 0.38% charged by the iShares fund. Additionally, XLK offers a higher payout with a dividend yield of 0.50%.
Performance & risk comparison
| Metric | XLK | IYW |
|---|---|---|
| Max drawdown (5 yr) | (33.60%) | (39.40%) |
| Growth of $1,000 over 5 years (total return) | $2,353 | $2,356 |
What's inside
iShares U.S. Technology ETF (NYSEMKT:IYW) holds 139 positions, providing a diversified look at the sector. Its portfolio includes technology at 82.00%, communication services at 17.00%, and industrials at 1.00%. Its largest positions include Nvidia (NASDAQ:NVDA) at 17.00%, Apple (NASDAQ:AAPL) at 13.67%, and Alphabet (NASDAQ:GOOGL) at 7.04%. The inclusion of Alphabet distinguishes this fund from competitors that exclude communication services giants. Launched in 2000, the iShares fund has paid $0.27 per share over the trailing 12 months. It tracks a broad index of domestic equities and does not employ complex strategies or leverage.
In contrast, State Street Technology Select Sector SPDR ETF (NYSEMKT:XLK) holds 73 positions and focuses almost exclusively on technology at 99.00%. Its selection criteria result in a top-heavy structure that reflects the dominance of the most valuable tech entities in the United States. Largest positions include Nvidia (NASDAQ:NVDA) at 15.42%, Apple (NASDAQ:AAPL) at 12.37%, and Microsoft (NASDAQ:MSFT) at 9.98%. This fund was launched in 1998 and has a trailing-12-month dividend of $0.76 per share. Like its counterpart, it features no unusual quirks and relies on the Technology Select Sector Index to provide proxy exposure to the largest tech firms in the S&P 500.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Both XLK and IYW offer targeted exposure to U.S. technology companies, but they draw the boundary around "tech" in meaningfully different ways. XLK follows the S&P 500's sector classification system, which puts Alphabet and Meta in the communications services bucket -- meaning Google's parent company doesn't appear here at all. IYW uses a broader FTSE Russell definition that pulls Alphabet and Meta into the fold alongside traditional tech names, making it a more intuitive representation of what most investors think of as the technology sector.
That difference shows up in the portfolio: IYW holds roughly twice as many companies as XLK, with Alphabet among its top positions. Investors who consider Google and Meta essential parts of the technology story and want a single fund to reflect that will find IYW the more complete fit.
XLK is the better choice for cost-conscious investors who are comfortable with the narrower S&P definition of tech and don't mind getting their Alphabet exposure elsewhere. It charges a fraction of what IYW does, a gap that compounds meaningfully over time, and its massive scale makes it one of the most liquid and widely held sector funds available. IYW suits investors willing to pay more for a broader, more intuitive view of what the technology sector actually looks like today.
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Sara Appino has positions in Apple and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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