XLK Offers Broader Tech Diversification, While SOXX Targets Semiconductor Stocks. Which Is the Better Investment?
Key Points
XLK is significantly cheaper to own and far larger than SOXX, but its recent returns have lagged the semiconductor-focused fund.
SOXX is more volatile and suffered a deeper five-year drawdown, reflecting its narrow chip-sector tilt.
XLK offers broader tech exposure, with mega-cap holdings like Nvidia, Apple, and Microsoft dominating its portfolio.
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Both the iShares Semiconductor ETF (NASDAQ:SOXX) and the State Street Technology Select Sector SPDR ETF (NYSEMKT:XLK) aim to capture U.S. technology growth, but their approaches differ: SOXX zeroes in on the semiconductor segment, while XLK provides diversified exposure across the entire technology sector.
For investors comparing these two, the choice comes down to cost, risk profile, and the breadth of tech exposure each fund delivers.
Snapshot (cost & size)
| Metric | SOXX | XLK |
|---|---|---|
| Issuer | iShares | SPDR |
| Expense ratio | 0.34% | 0.08% |
| 1-yr return (as of Jan. 2, 2026) | 45.63% | 24.13% |
| Dividend yield | 0.55% | 0.53% |
| AUM | $17 billion | $93 billion |
| Beta (5Y monthly) | 1.77 | 1.26 |
Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.
XLK offers a substantially lower expense ratio than SOXX, which could appeal to investors looking to minimize fees. Both funds offer similar dividend yields, so income-focused investors won't notice a meaningful difference between the two in this regard.
Performance & risk comparison
| Metric | SOXX | XLK |
|---|---|---|
| Growth of $1,000 over 5 years | $2,483 | $2,220 |
| Max drawdown (5Y) | -45.75% | -33.56% |
Over the last five years, SOXX delivered stronger growth than XLK, but it also experienced a much deeper maximum drawdown -- reflecting its higher risk and narrower sector focus compared to XLK’s broader tech approach.
What's inside
XLK tracks the performance of the Technology Select Sector Index, offering exposure to 70 leading U.S. technology stocks across hardware, software, IT services, and semiconductors.
Its top holdings -- Nvidia, Apple, and Microsoft -- collectively make up nearly 40% of assets, highlighting a mega-cap tilt. With 27 years of history and over $90 billion in assets under management (AUM), XLK is among the largest and most liquid sector ETFs available.
SOXX, by contrast, is laser-focused on the semiconductor industry, holding just 30 companies. Its largest positions include Nvidia, Advanced Micro Devices, and Micron Technology.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
XLK and SOXX are both tech-centric funds, but they differ in their approaches and goals.
XLK is much broader, not only in its portfolio size (containing more than twice the number of stocks as SOXX), but in its diversification, too. It includes stocks from various corners of the technology sector, which can help mitigate its risk during periods of volatility.
SOXX, on the other hand, is devoted entirely to semiconductor stocks. This targeted approach can be both an advantage and a risk. When semiconductor companies are thriving, this ETF can significantly outperform the market. But when this segment of the market stumbles, investors are likely to see much steeper downturns.
Case in point: SOXX has earned much higher 12-month and five-year total returns compared to XLK, but it's also experienced a much more severe max drawdown in that time. With a higher beta, it's also more susceptible to larger price fluctuations.
When choosing between the two funds, investors will need to consider their goals and risk tolerance. SOXX is a higher-risk fund, but it also offers higher earning potential due to its hyperfocus on the fast-growing semiconductor sector. While XLK is also devoted to tech stocks, it offers more diversification that can better protect your portfolio during periods of volatility.
Glossary
ETF: Exchange-traded fund; a pooled investment fund traded on stock exchanges like a stock.
Expense ratio: Annual fee, as a percentage of assets, that investors pay to own a fund.
Dividend yield: Annual dividends paid by a fund divided by its share price, shown as a percentage.
AUM: Assets under management; the total market value of assets a fund manages.
Beta: A measure of a fund's volatility compared to the overall market, usually the S&P 500.
Max drawdown: The largest observed percentage drop from a fund's peak value to its lowest point over a period.
Sector ETF: An ETF that invests primarily in companies from a specific industry or sector.
Concentrated risk: Higher risk due to investing in a small number of companies or a single industry.
Mega-cap: Companies with extremely large market capitalizations, typically over $200 billion.
Liquidity: How easily an asset or fund can be bought or sold without affecting its price.
Total return: Investment return including both price changes and dividends or distributions, assuming reinvestment.
Drawdown: A decline in investment value from a peak to a trough, before a new peak is achieved.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, and iShares Trust - iShares Semiconductor ETF. 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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