Better Tech ETF for Artificial Intelligence (AI): Vanguard's VGT vs. iShares' IYW
Key Points
The Vanguard Information Technology ETF has a lower expense ratio and higher dividend yield than iShares U.S. Technology ETF.
The iShares U.S. Technology ETF includes a 17% allocation to communication services while the Vanguard Information Technology ETF stays almost entirely in tech stocks.
The Vanguard Information Technology ETF holds over twice as many stocks as iShares U.S. Technology ETF, providing broader exposure across the sector.
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The Vanguard Information Technology ETF (NYSEMKT:VGT) offers a low-cost, broad approach to tech, while the iShares U.S. Technology ETF (NYSEMKT:IYW) provides a more concentrated portfolio with broader sector definitions.
Investors seeking exposure to the technology sector often choose between these two heavyweights. While both target domestic tech leaders, differences in index construction, costs, and dividend distributions can significantly impact the long-term experience for a portfolio. This comparison highlights how their underlying portfolios and expense structures differ.
Snapshot (cost & size)
| Metric | VGT | IYW |
|---|---|---|
| Issuer | Vanguard | iShares |
| Expense ratio | 0.09% | 0.38% |
| 1-yr return (as of April 27, 2026) | 53.30% | 53.70% |
| Dividend yield | 0.44% | 0.13% |
| Beta | 1.32 | 1.33 |
| Assets under management (AUM) | $121.3 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 Vanguard fund is significantly more affordable, with an expense ratio of 0.09% compared to 0.38% for the iShares fund. Additionally, the Vanguard fund offers a higher payout with a 0.44% yield versus 0.13% for its competitor.
Performance & risk comparison
| Metric | VGT | IYW |
|---|---|---|
| Max drawdown (5 yr) | (35.10%) | (39.40%) |
| Growth of $1,000 over 5 years (total return) | ~$2.2k | ~$2.4k |
What's inside
The iShares U.S. Technology ETF tracks a portfolio where technology makes up 82% of the fund, alongside 17% in communication services and 1% in industrials. Its holdings count stands at 139, and its largest positions include Nvidia (NASDAQ:NVDA) at 17%, Apple (NASDAQ:AAPL) at 13.67%, and Alphabet Class A (NASDAQ:GOOGL) at 7.04%. This fund was launched in 2000 and has a trailing-12-month dividend of $0.27 per share.
In contrast, the Vanguard Information Technology ETF is more diversified with 310 holdings. Its sector exposure is almost exclusively technology at 98%, with 1% in industrials and 1% in cash and others. Top holdings include Nvidia at 18.47%, Apple at 15.80%, and Microsoft (NASDAQ:MSFT) at 10.17%. The Vanguard fund was launched in 2004 and has a trailing-12-month dividend of $2.41 per share.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Investors seeking exposure to artificial intelligence stocks can get that through the iShares U.S. Technology ETF (IYW) and Vanguard Information Technology ETF (VGT). Both include AI semiconductor leader Nvidia as the top holding, as well as other AI heavyweights such as Microsoft. Choosing between them comes down to a few key considerations.
IYW takes a broad approach to the equities included in the fund. This has resulted in over 16% of IYW’s holdings dedicated to media and entertainment stocks, and businesses such as Google parent Alphabet being included. However, IYW’s expense ratio is high and its dividend yield is low compared to VGT. This ETF is better for investors who want a wider tech lens to capture AI powerhouses such as Google.
VGT focuses more on pure tech companies with over a third of its holdings in the semiconductor sector, the largest part of its portfolio. Because semiconductor companies have been particularly successful in recent years thanks to AI, this emphasis has helped the fund provide comparable one-year performance to IYW. Given its far lower expense ratio, this ETF is for cost-conscious investors who want a greater focus on pure AI technology stocks.
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Robert Izquierdo has positions in Alphabet, Apple, Microsoft, 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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