VGT vs. QQQ vs. SOXX: Which Tech ETF Is Right for You?

TradingKey - The current trends in the market relate to technology and AI creation.

Many investors are tempted to cash in on the hype-driven phenomenon by investing in a diversified group of companies, such as through the purchase of the Vanguard Information Technology ETF (VGT), which provides exposure to multiple publicly traded technology stocks.

However, as investors in the past have learned, times of uncertainty usually warrant more diversification than times of certainty - not all technology funds provide the same level of diversification.

The Vanguard Information Technology ETF tracks the U.S. information technology industry, with approximately 314 or 322 stocks, depending on the latest index update. It includes semiconductors, system software, technology hardware, application software, semiconductor materials and equipment and follows a straight line, unamortized approach, without any currency hedging or ESG overlays.

Vanguard Information Technology ETFs are now up nearly 22% for the past 12 months, outperforming the S&P 500 and the Nasdaq Composite, both of which have also posted gains.

That said, VGT has a major concentration risk. Because it is primarily a market-capitalization-based ETF, a few huge companies have a large impact on its returns.

Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT)are the three largest positions in the VGT ETF and equal about 44% of its holdings. About 98% of the total assets in the ETF are invested within the technology sector. Nvidia powers AI hardware, Apple reinvented consumer electronics, and Microsoft is the toolkit of the tech industry; however, the concentration of these companies at such levels creates potential for high rewards and high risks.

Invesco QQQ Trust ETF (QQQ) has been created by Invesco (IVZ) and is designed to track the performance of the NASDAQ 100 Index. The NASDAQ 100 Index is composed of 100 of the largest companies — excluding banks — based on market capitalization that trade on NASDAQ. Most of the companies in this index are extremely innovative, have extremely high market capitalizations, and continue to lead globally in their fields.

The iShares Semiconductor ETF (SOXX) is an exchange-traded fund (ETF), managed by the iShares division of BlackRock (BLK), the largest asset management company in the world.

SOXX was created on July 10, 2001, and originally tracked the Philadelphia Semiconductor Sector Index (PHLX) until mid-2021, when its benchmark switched to the ICE Semiconductor Index, which tracks 30 publicly traded companies in the United States that manufacture semiconductors and related components.

QQQ replicates the Nasdaq-100, which consists of the 100 largest nonfinancial companies on the Nasdaq. While it's not considered a technology-only fund, it has approximately 64% of its portfolio in technology stocks. This is important because there are some companies that many investors consider "tech" but are categorized as in other sectors.

Because VGT is a pure information technology ETF, it does not include Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), Tesla (TSLA), or Netflix (NFLX) among its holdings, because they are all considered to be part of other sectors (communication services or consumer discretionary) when using the official sector definitions.

The other difference between the two ETFs is concentration. For example, Nvidia, Apple, and Microsoft together represent just less than 25% of the QQQ (approximately 9.16% Nvidia, 8.85% Apple, and 7.47% Microsoft) versus approximately 45% for VGT.

While having three companies constitute approximately 25% of a portfolio is not ideal diversification, it is not as top-heavy as VGT. In 2025, QQQ has had very similar year-to-date returns as VGT, despite the fact that QQQ has a much lower concentration than VGT, which supports the thesis that you can obtain technology-type returns without massive single-stock risk.

In the grand scheme of things, the original source material demonstrates a depth of sophistication for its price movement during this time period. The principal reason is due to the results of Nvidia and other similar investments within VGT. But if you zoom out to 2004, when VGT first began operating, QQQ has marginally surpassed VGT.

While no one can predict what will happen in the stock market over the next three years, I believe that QQQ is the better risk-adjusted option. It includes the technology companies (the "big names") that people want while providing additional exposure to AI through application developers (i.e., Alphabet, Amazon, Meta), thus on the application side, helping mitigate a potential decline in returns on hardware manufacturers.

VGT represents a leveraged investment in AI infrastructure, with significant exposure to Nvidia. It has experienced tremendous growth as a result of increased demand for GPUs, AI accelerator chips, and data center equipment.

Although this increased demand may hold up going forward, increasing competition from companies such as Alphabet and Amazon, who are developing their own chips, and from Advanced Micro Devices (AMD), will mean that Nvidia will have a tougher time continuing to grow revenues at the same pace.

If you would like broader AI exposure, consider QQQ's holdings in Alphabet, Amazon, and Meta for the application portion of the theme, as some investors believe this is a more balanced way to gain exposure near term.

Investing in VGT and SOXX is an entirely different thing, which involves additional trade-offs between the two.

For example, VGT is a diversified tech sector ETF that has a low expense ratio at 0.09% and large scale (approx. 130.0 billion in AUM) while SOXX is an iShares fund focused closely on the U.S. semiconductor space with a higher expense ratio (0.34%) but much smaller asset base (around $16.7 billion). 

As one would expect from a fund designed to be concentrated, SOXX has a limited number of holdings (about 30 chip leaders), with a large concentration in three major names, which are Broadcom (AVGO), Advanced Micro Devices, and Nvidia. VGT, on the other hand, has 300-plus holdings with broader IT sector exposure.

The risk and return evolution of these funds follows suit. (As of December 2025)

The cost of an investment has an impact on returns, so VGT’s low expense ratio of 0.09% allows investors to invest in diverse technology companies at a lower cost.

On the other hand, SOXX’s expense ratio of 0.34% is higher because of the fund's narrow focus of its investments.

VGT’s dividend yield is currently around 0.41%, while SOXX has a dividend yield of approximately 0.55%. These dividend yields are not likely to be the primary drivers of returns; however, they will enhance the total return.

VGT (Vanguard Information Technology ETF), QQQ (Invesco QQQ Trust), and SOXX (iShares Semiconductor ETF) all give you access to the technology sector within the market, but they do it in different ways. 

 When investing in VGT, QQQ, or SOXX, make sure your decision is based upon your belief in artificial intelligence hardware versus software development, and your willingness to accept high levels of cost, volatility, and long-term appreciation in value. Ultimately, aligning these issues is of much greater importance than trying to find out which ETF had the best return the previous year.