VGT vs. SOXX: Should Investors Choose a Broad Tech ETF or a Niche Semiconductor Fund?

The iShares Semiconductor ETF (NASDAQ:SOXX) and the Vanguard Information Technology ETF (NYSEMKT:VGT) take different approaches to tech investing -- SOXX focuses solely on semiconductors, while VGT offers broader exposure to technology hardware, software, and services.

Both funds provide access to high-growth tech companies. SOXX zeroes in on a concentrated slice of the chip industry, whereas VGT casts a much wider net, holding over 300 stocks across the technology sector. Here's how the two funds compare for investors interested in tech ETFs.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

VGT stands out for its much lower expense ratio, making it more affordable for long-term investors. SOXX's slightly higher dividend yield, though, could be more appealing for investors focused on building dividend income.

Performance & risk comparison

What's inside

VGT covers nearly the entire U.S. technology sector, holding 314 stocks, as of this writing. Its top positions include Nvidia, which makes up 18.18% of the fund, Apple at 14.29%, and Microsoft at 12.93% -- reflecting a heavy tilt toward mega-cap tech.

SOXX, by contrast, is tightly focused on just 30 companies entirely within the semiconductor industry. Its largest holdings include Advanced Micro Devices, Broadcom, and Micron Technology. Each stock makes up around 7% to 8% of the fund's total assets. This concentrated approach means more exposure to the ups and downs of the chip sector, with no meaningful diversification.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

VGT and SOXX both provide access to technology stocks. However, while SOXX targets a highly niche subsector, VGT takes a broader approach.

SOXX only includes 30 semiconductor stocks, resulting in minimal diversification. That can increase risk substantially, especially during periods of volatility. But if the semiconductor industry continues to thrive like it has in recent years, a highly targeted ETF like this could supercharge your earnings.

VGT also includes semiconductor stocks, as well as companies from every other corner of the technology industry. This broader portfolio can help limit its risk during periods of volatility. If the semiconductor industry is hit hard during the next downturn, VGT will likely experience less severe price fluctuations compared to SOXX.

Greater diversification isn't ideal in every single situation, though. In some cases, funds with more holdings can experience lower returns, as the superstar stocks are weighed down by the underperformers.

SOXX has outperformed VGT in both one- and five-year total returns, suggesting that its narrow focus has paid off in recent years. However, its higher beta and steeper max drawdown also mean that it's experienced more price volatility compared to VGT, too.

Where you choose to invest will depend on what you're looking to achieve in a tech ETF. VGT carries less risk but has also experienced lower total returns in recent years, and it offers the most diversification. SOXX, on the other hand, is a high-risk, high-reward type of ETF with a laser focus on just one niche subsector.

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 investors.
Semi­conductor: A material or company involved in making chips used in electronics and computing devices.
Dividend yield: Annual dividends paid by a fund or stock, expressed as a percentage of its price.
Beta: A measure of an investment's volatility compared to the overall market, usually the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages.
Max drawdown: The largest observed percentage drop from a fund's peak value to its lowest point over a period.
Growth of $1,000: The increase in value of a $1,000 investment over a specified time period, including returns.
Mega-cap: Companies with extremely large market capitalizations, typically over $200 billion.
Concentrated approach: Investment strategy focusing on a small number of holdings, increasing exposure to specific sectors or companies.
Diversification: Spreading investments across various assets to reduce risk.

Katie Brockman has positions in Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, and iShares Trust - iShares Semiconductor ETF. The Motley Fool recommends Broadcom and 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.