Better AI Tech ETF: ProShares' QLD vs. Direxion's SOXL

The Direxion Daily Semiconductor Bull 3X Shares (NYSEMKT:SOXL) and ProShares - Ultra QQQ (NYSEMKT:QLD) both offer leveraged exposure to U.S. technology themes, but SOXL delivers triple daily leverage to semiconductors while QLD targets double daily leverage to a broader NASDAQ-100 mix.

Both SOXL and QLD cater to investors seeking amplified returns from leading technology stocks, but their approaches diverge sharply. SOXL is a pure semiconductor play with three times daily leverage, while QLD offers two times daily leverage to a more diversified set of technology, communication services, and consumer cyclical companies.

This comparison explores their costs, risk profiles, sector tilts, and portfolio concentration to help clarify which may appeal depending on an investor’s risk appetite and market outlook.

Snapshot (cost & size)

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.

SOXL is slightly more affordable on expenses, but both funds charge close to one percent annually. Dividend yields are identical and minimal, so cost differences are modest and unlikely to drive most decisions.

Performance & risk comparison

SOXL’s triple leverage results in dramatic swings, with a five-year max drawdown exceeding 90%, compared to QLD’s 64%. Despite higher recent one-year returns, SOXL’s long-term compounding lagged QLD, which grew an initial $1,000 to $2,370 over five years.

What's inside

QLD seeks to double the daily performance of the NASDAQ-100, resulting in a portfolio with 121 holdings and a strong technology tilt (53%), but also meaningful allocations to communication services (17%) and consumer cyclical stocks (13%). Its largest positions are Nvidia Corp. (NASDAQ:NVDA) at 7.36%, Apple Inc. (NASDAQ:AAPL) at 6.07%, and Microsoft Corp. (NASDAQ:MSFT) at 5.07%. With nearly 20 years of history, QLD’s broader sector footprint may help smooth sector-specific volatility, but the daily leverage reset introduces unique risks and complicates long-term tracking.

SOXL is far more concentrated, tracking a 100% technology basket tied exclusively to semiconductors. Its top holdings include Micron Technology Inc. (NASDAQ:MU), Advanced Micro Devices (NASDAQ:AMD), and Nvidia, each representing less than two percent of assets under management. Both funds’ daily leverage resets can create compounding effects that may diverge from expected returns over time, especially in volatile markets.

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What this means for investors

The Direxion Daily Semiconductor Bull 3X Shares (SOXL) and ProShares Ultra QQQ (QLD) ETFs are both for investors who are bullish on the technology sector, but given each fund’s focus, one may prove a better investment than the other depending on your investment goals.

Both offer a means to capitalize on the hot artificial intelligence sector. Since SOXL and QLD are leveraged ETFs, they seek to amplify returns through the use of debt and derivatives. However, this strategy introduces magnified risk if the ETF’s holdings experience a downturn.

SOXL is for investors who are specifically interested in the semiconductor industry, which is a key sector in enabling AI. This ETF has the potential for big gains because of AI’s massive expansion. That said, semiconductor stocks have experienced a lot of volatility as some investors have feared the AI market is in a bubble.

QLD offers exposure to AI stocks, but since its holdings span beyond semiconductors, it’s a more diversified ETF than SOXL. This provides protection from declines in some stocks or in specific sectors within tech. The diversification also contributes to less volatility and risk than SOXL.

SOXL is a high risk, high reward play on AI. QLD may not deliver the potential return SOXL offers, but it won’t be as adversely impacted by any swings in AI stocks. Because both are leveraged ETFs, they are best held only for the short term.

Robert Izquierdo has positions in Advanced Micro Devices, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.