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XLK is significantly cheaper to own and much larger than SOXX, but its recent returns have lagged the semiconductor-focused fund.
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SOXX is more volatile and suffered its deepest decline in five years, reflecting its narrow tilt toward the chip sector.
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XLK offers broader technology 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) They aim to capture US technology growth, but their approaches differ: SOXX focuses on the semiconductor segment, while XLK offers diversified exposure across the technology sector.
For investors comparing these two, the choice comes down to cost, risk profile, and the breadth of technology exposure each fund offers.
|
Metric
|
SOXX
|
XLK
|
|
Editor
|
iShares
|
SPDR
|
|
Expense ratio
|
0.34%
|
0.08%
|
|
1-year declaration (as of January 2, 2026)
|
45.63%
|
24.13%
|
|
Dividend yield
|
0.55%
|
0.53%
|
|
AUM
|
$17 billion
|
$93 billion
|
|
Beta (5 years monthly)
|
1.77
|
1.26
|
Beta measures price volatility relative to the S&P 500. The 1-year return represents the total return over the past 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 significant difference between the two in this regard.
|
Metric
|
SOXX
|
XLK
|
|
$1,000 growth in 5 years
|
$2,483
|
$2,220
|
|
Maximum reduction (5 years)
|
-45.75%
|
-33.56%
|
Over the past five years, SOXX generated stronger growth than XLK, but also experienced a much deeper peak decline, reflecting its higher risk and narrower sector focus compared to XLK’s broader technology focus.
XLK tracks the performance of the Technology Select Sector Index and offers exposure to 70 leading US technology stocks across hardware, software, IT services and semiconductors.
Its main holdings: NVIDIA, Appleand microsoft – together they represent almost 40% of assets, highlighting an inclination towards mega capitalization. With 27 years of history and more than $90 billion in assets under management (AUM), XLK is among the largest and most liquid sector ETFs available.
SOXX, on the other hand, focuses exclusively on the semiconductor industry and has only 30 companies. Its most important holdings include Nvidia, Advanced Microdevicesand Micron technology.
For more guidance on investing in ETFs, check out the full guide at this link.
XLK and SOXX are technology-focused funds, but they differ in their focuses and objectives.
XLK is much broader, not only in the size of its portfolio (which contains more than twice as many stocks as SOXX), but also in its diversification. It includes stocks from various corners of the technology sector, which can help mitigate your risk during periods of volatility.
SOXX, on the other hand, is dedicated exclusively to semiconductor stocks. This targeted approach can be both an advantage and a risk. When semiconductor companies thrive, this ETF can significantly outperform the market. But when this segment of the market stumbles, investors are likely to experience much steeper declines.
Case in point: SOXX has earned much higher 12-month and five-year total returns compared to XLK, but has also seen a much more severe cap drawdown in that time. With a higher beta, it is also more susceptible to larger price fluctuations.
When choosing between the two funds, investors will need to consider their objectives and risk tolerance. SOXX is a higher risk fund, but also offers higher profit potential due to its strong focus on the fast-growing semiconductor sector. While XLK is also dedicated to technology stocks, it offers greater diversification that can better protect your portfolio during periods of volatility.
ETFs: exchange-traded fund; a pooled investment fund that trades on stock exchanges like a stock.
Expense ratio: The annual fee, as a percentage of assets, paid by investors 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 the assets managed by a fund.
Beta: A measure of a fund’s volatility compared to the broader market, usually the S&P 500.
Maximum reduction: The largest percentage drop observed from a fund’s peak value to its lowest point over a period.
Sector ETFs: An ETF that invests primarily in companies in a specific industry or sector.
Concentrated risk: Higher risk for investing in a small number of companies or a single industry.
Mega capitalization: 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 profitability: Return on investment that includes both price changes and dividends or distributions, assuming reinvestment.
Reduction: A decrease in the value of the investment from a peak to a trough, before a new peak is reached.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool holds 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.
XLK offers broader technology diversification, while SOXX targets semiconductor stocks. What is the best investment? was originally published by The Motley Fool
