7 Best Tech ETFs: Tech Titans of 2023 Shaping the Market

As with most sectors, periods of outperformance can be cyclical; and technology is no different. After incredible returns in 2019, 2020, and 2021, the technology sector had a tragic performance in 2022; in a year where energy came out on top. The performance of the tech sector has fared better in 2023, and over time, it has proven to be the most attractive sector for returns in the US.

The term “technology” lends itself to a wide array of industries and can include companies involved in; semiconductors, software, hardware, communication services, cloud, cybersecurity, information technology, IT services, and many more. Through Exchange Traded Funds (ETFs), investors have the ability to capture exposure to the broad tech sector, specific industries within the sector, themes, and geographics.

Identifying the Top Tech ETFs: Our Strategy

To identify the best tech ETF, we selected funds to provide diversity in terms of coverage, specialization, cost, and yield. You will find ETFs in our list that focus on broad coverage, low costs, specific countries, industries, themes, and liquidity. It is our intention to show you the breadth and depth of choices an investor has when looking for emerging market exposure.

The 7 Leading Tech ETFs of 2023

*Data as of September 27th, 2023

Ready to monitor these funds closely? Keep scrolling to the end of the article to uncover simple tips for creating your own watchlist! 

Invesco’s QQQ is the largest and most well-known technology ETF in the world, and tracks the Nasdaq 100 index. In 1985, the Nasdaq 100 was created to track America’s largest technology companies. In 1999, the Nasdaq 100 tracking ETF (QQQ) was created.

Looking back on the security’s 20th anniversary in 2019, Dan Draper, then Managing Director of Invesco ETFs, recounted:

“When QQQ was launched in 1999, most investors were just learning about index-tracking investment products, and the transparency offered by an ETF was novel. It is interesting to look back 20 years later at how relevant and well-regarded the Invesco QQQ remains, even as much of the ETF landscape has changed”.

As you might have guessed, amongst the fund’s 101 holdings, the largest sectors of exposure are information technology (48%), communication services (16%), and consumer discretionary (14%). The largest holdings include names like Apple (11%), Microsoft (10%), Amazon (5%), Nvidia (4%), Meta (4%), and Tesla (3%). With $198.8 billion in assets under management (AUM) and a reasonable expense ratio of 0.2%, QQQ offers investors a low-cost, liquid, exposure to America’s greatest technology companies.

Key Investment Insights for Invesco QQQ Trust (QQQ):

Invesco’s RSPT, a specialized tech ETF, seeks to match the S&P 500 information technology index, and rebalances regularly to ascribe each holding an equal weighting in the portfolio. For instance, while Apple is ~11% of QQQ, it’s only ~1.7% of RSPT. Because this fund focused solely on the information technology sector, the number of holdings (67) is lower than QQQ, but the concentration is still less pronounced because of the equal weighting process. The top 10 positions in RSPT take up 19.2% of the fund, compared to 48% in QQQ. 

At $2.9 billion in AUM and an expense ratio of 0.4%, RSPT is smaller and more expensive than QQQ. The slightly higher dividend yield of 0.67% is something to consider, but what you will find is that QQQ, over most of the two security’s history, has outperformed. There are instances, over shorter time periods, where RSPT has outperformed, and this fund is likely more useful to investors in moments when they feel the QQQ’s largest holdings are particularly overvalued or due a period of reversion to the mean. As such, while QQQ typically is a better hold over the long-term, RSPT can be a useful fund to rotate into during periods of exuberance, or for investors who are less comfortable with the concentration levels within QQQ.

Key Investment Insights for Invesco S&P 500 Equal Weight Technology (RSPT):

SPDR’s XLK seeks to invest in the American information tech sector. Unlike RSPT, XLK is not equally weighted. While it adopts the same level of concentration within the information technology sector, as well as a similar number of holdings (68), the XLK ETF has a slightly different composition of companies than QQQ, at a more concentrated level. The largest holdings in XLK include Apple (24%), Microsoft (23%), Nvidia (4%), Broadcom (4%), and Adobe (3%).

XLK, with a fund size of $48 billion in AUM, is larger and more liquid than RSPT, and offers a higher dividend yield of 0.77% with a lower expense ratio of 0.1%. The fund is suitable for investors who want to focus on the information technology sector with a higher level of concentration.

Key Investment Insights for SPDR Technology Sector (XLK):

Before we move on from the information tech sector. Vanguard’s VGT is another technology ETF focused on this sector, with a relatively large asset base of $50.2 billion and an affordable expense ratio of 0.1%. Like XLK, this fund is not equally weighted. Also similar to XLK, this fund’s top holdings are similar in weighting and order. The biggest difference, however, is that VGT is diversified across 323 holdings compared to XLK’s 68.

This leading technology ETF aims to invest across a broader range of market cap sizes and is slightly less concentrated than XLK. Perfect for investors who want to focus on the information tech sector, but across a wider universe of US stocks.

Key Investment Insights for Vanguard Information Technology ETF (VGT):

The iShares Global Tech ETF, IXN, is suited towards investors who want to acquire exposure to the US technology market, but also want some international flavor. IXN holds 80% of its assets in the United States, with 20% of the fund allocated to technology companies across Taiwan (5%), Japan (4%), South Korea (3%), Europe (4%), Canada (1%) and more.

While the fund’s largest holdings are similar to those which we have seen in previous ETFs, they also include international names like Taiwan Semiconductor (4%), Samsung Electronics (2%), and ASML Holding (2%). The fund has $3.4 billion in AUM, and expense ratio of 0.4%, and a dividend yield of 0.62%.

Key Investment Insights for iShares Global Tech ETF (IXN):

For investors looking to gain exposure to particular themes or industries within the technology market, our next two selections may provide you with an idea of the optionality that exists within ETFs to do so. The First Trust Nasdaq Cybersecurity ETF, CIBR, stands out among technology ETFs by focusing exclusively on cybersecurity companies listed in the USA. CIBR has the fewest holdings of any ETF on our list, and includes companies such as Infosys (6%), Fortinet (6%), Palo Alto Networks (6%), Cisco Systems (6%), Broadcom (6%), Splunk (4%) and Crowdstrike (3%).

As the world becomes increasingly online, particularly the corporate world, and migrates storage and solutions to the cloud, cybersecurity firms are expected to be the benefactors of this long-term tailwind. For investors who want broad exposure to this theme, CIBR may be an ideal fund. The fund currently has more than $5 billion in AUM and an expense ratio of 0.6%.

Key Investment Insights for First Trust Nasdaq Cybersecurity ETF (CIBR):

Another technology theme that has gained attention of late is semiconductors. While the industry affects thousands of technology companies, this iShares Semiconductor ETF, SOXX, is focused on companies in the field of manufacturing and equipment supply. Companies such as Advanced Micro Devices (8%), Broadcom (8%), Nvidia (7%), Intel (7%), and Texas Instruments (6%) are some of the largest holdings.

The fund currently has $8.4 billion in AUM and has seen a strong inflow of funds since 2020. SOXX offers investors exposure to 35 semiconductor companies with an expense ratio of 0.35% and provides a dividend yield of 1%. For a deeper dive into semiconductor-focused ETFs like SOXX, check out our article on the best semiconductor ETFs.

Key Investment Insights for iShares Semiconductor ETF (SOXX):

How to Create a Watchlist for Top Tech ETFs

Step 1: Sign Up to Koyfin for Free. Register an account and get started; no credit card required.  

Step 2: Create a Watchlist. Head to ‘My Watchlists’, create a new watchlist and give it a name. 

Step 3: Add Tickers. Click ‘Add Ticker’, then ‘Import Securities’, then copy and paste the below list of tickers. 

XLK, VGT, QQQ, SOXX, RSPT, IXN, CIBR

Step 4: Customize Columns. Hit the ‘Columns’ icon to add and remove columns from your watchlist table. 

We have thousands of data points you can add to a watchlist, including fundamental data, price and returns data, analyst estimates, percentile ranks, security information, portfolio tools, and the ability to create your own formulas and labels. 

Now your watchlist is ready, and you can use the rest of the Koyfin terminal to track and analyze these ETFs.

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Our insights are derived solely from historical information and analyst predictions, employing an impartial approach. Please note that our articles do not serve as financial guidance.