XLK vs. VGT: Here's Why State Street's Tech ETF Has The Edge

Vanguard's VGT may be bigger, but State Street's XLK has performed better and is slightly less top-heavy.State Street Technology Select Sector SPDR ETF (XLK 0.97%) and Vanguard Information Technology ETF (VGT 1.12%) both target U.S. technology giants. However, VGT holds more stocks and has a greater asset base. XLK edges ahead on recent returns and remains marginally cheaper.Both XLK and VGT aim to give investors focused exposure to the technology sector, tracking slightly different benchmarks and methodologies. This comparison looks at cost, performance, risk, and portfolio holdings to help you decide which might suit your priorities. Snapshot (cost & size)Both ETFs are similarly priced and offer modest yields, with State Street's (STT +1.07%) fund coming in just a hair more affordable.MetricXLKVGTIssuerState Street Investment ManagementVanguardExpense ratio0.08%0.09%1-yr return (as of 2025-12-15)21.49%18.28%Dividend yield0.5%0.4%Beta1.231.26AUM$92.8 billion$130.0 billionBeta 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.Performance & risk comparisonMetricXLKVGTMax drawdown (5 y)-33.55%-35.08%Growth of $1,000 over 5 years$2,319$2,222What's insideVanguard Information Technology ETF casts a wider net, holding over 320 stocks across the technology sector, with a small allocation to communication services and financials. Its top three holdings are Nvidia (NVDA +0.70%), Apple (AAPL 1.46%), and Microsoft (MSFT 0.77%). These make up a substantial portion of assets, giving the portfolio a tilt toward mega-cap tech. The fund has an almost 20-year track record and manages $138.0 billion in assets under management, making it one of the largest sector ETFs available.State Street Technology Select Sector SPDR ETF is even more concentrated in technology, with almost 99% sector exposure and a portfolio of around 70 holdings. Like VGT, its largest positions are Nvidia, Apple, and Microsoft. For more guidance on ETF investing, check out the full guide at this link.What this means for investorsVanguard Information Technology ETF and State Street Technology Select Sector SPDR ETF are extremely similar. Their technology focus means they have both outperformed the S&P 500 in recent times. Even so, State Street's XLK has a slight edge over Vanguard's VGT performance-wise, generating better returns over the past year and the past five years. Its expense ratio is also very slightly lower.The Vanguard ETF aims to track the MSCI US Investable Market Information Technology 25/50 Index, which contains a mix of U.S. IT companies of different sizes. State Street's fund is more targeted at large-cap companies as it is designed to track the technology sector of the S&P 500.AdvertisementVGT looks more diversified because it holds more stocks and has a couple of non-tech companies. However, that's a little misleading as Nvidia, Apple, and Microsoft make up 45% of its holdings. XLK isn't much better -- the three giants account for 38% of its investments. That may be concerning for investors who worry that the AI rally can't last forever.GlossaryETF: Exchange-traded fund; a basket of securities traded on an exchange like a stock.Expense ratio: The annual fee, as a percentage of assets, that a fund charges its shareholders.Assets under management (AUM): The total market value of assets a fund or investment manager oversees.Dividend yield: Annual dividends paid by a fund or stock divided by its current price, expressed as a percentage.Beta: A measure of an investment's volatility compared to the overall market, typically the S&P 500.Drawdown: The peak-to-trough decline during a specific period for an investment, usually shown as a percentage.Sector exposure: The proportion of a fund's assets invested in a particular industry or sector.Benchmark: A standard index or measure used to compare the performance of a fund or investment.Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.Portfolio weighting: The percentage of a portfolio allocated to a particular asset, stock, or sector.Mega-cap: Companies with extremely large market capitalizations, typically over $200 billion.Track record: The historical performance or operational history of a fund or investment manager.About the AuthorEmma Newberry is a contributing Motley Fool cryptocurrency analyst covering digital currencies and blockchain trends. She previously wrote for Motley Fool Money (formerly The Ascent) on personal finance, investing, retirement readiness, and crypto. Earlier in her career, Emma founded an English-language newspaper in Colombia and contributed to Olympic city bid campaigns. She holds a bachelor’s degree in English literature with creative writing from the University of East Anglia in the UK.TMFemmanewberyRead NextDec 1, 2025 •By Bram BerkowitzIf You'd Invested $1,000 in the Technology Select Sector SPDR Fund (XLK) 10 Years Ago, Here's How Much You'd Have TodayNov 14, 2025 •By Eric TrieXLK vs. IYW: Focused Tech Exposure or Broader ReachNov 2, 2025 •By Robert IzquierdoBetter Artificial Intelligence ETF: Technology Select Sector SPDR Fund vs. Roundhill Generative AI & Technology ETFOct 25, 2024 •By Selena MaranjianIs the Technology Select Sector SPDR ETF a Millionaire Maker?Jul 20, 2024 •By David Jagielski, CPAInvesting Later in Life? 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