3 High-Performing Tech ETFs to Diversify Your Portfolio
With March 2025 proving to be a turbulent chapter for the U.S. stock market, the technology sector is at the heart of the storm. What began as a year of cautious optimism has unraveled into a wave of selling pressure driven by tariff uncertainties, fading AI euphoria, and doubts about lofty valuations.
The Nasdaq’s sharp retreat reflects a broader reality. Even tech’s brightest stars, including the admired Magnificent Seven, grapple with a more challenging road ahead as investors reassess growth prospects.
Picking a single tech stock in today’s market can feel like navigating a minefield—high reward, even higher risk. That’s where tech ETFs come in, offering diversified exposure with a more balanced risk profile.
3 Tech ETFs for a Diversified Technology Play
So, let’s look at three popular technology ETFs. Each offers broad exposure to the tech landscape and combines growth potential with diversification, making them compelling options amid the sector’s current turbulence.
A Leading Technology ETF: The QQQ
The Invesco QQQ Trust (NASDAQ: QQQ) is a household name among tech-focused ETFs, tracking the Nasdaq-100 Index, a collection of the 100 largest non-financial companies listed on the Nasdaq.
While not exclusively a tech fund, it has a heavy tilt toward the sector, with nearly 50% of its portfolio allocated to the technology sector. This has made it a go-to for investors seeking exposure to America’s tech titans. Magnificent Seven names, including Broadcom and Netflix, and excluding Tesla, mainly dominate its top holdings. Those eight names alone account for nearly half of the fund's weighting.
With $304 billion in assets under management (AUM), QQQ is a behemoth. It boasts high liquidity, with an average daily trading volume exceeding 34 million shares. The ETF’s expense ratio sits at 0.20%, which is reasonable for its scope, and it offers a modest dividend yield of 0.62%. Year-to-date in 2025, QQQ has felt the heat, down close to 6% and off its 52-week highs by almost 11%, but still maintains a stellar track record of outperformance over the previous decade.
The Vanguard Information Technology ETF
The Vanguard Information Technology ETF (NYSEARCA: VGT) takes a purer approach, zeroing in on the U.S. tech sector by tracking the MSCI US Investable Market Information Technology 25/50 Index. With $78 billion in AUM, VGT spans over 300 holdings, from giants to smaller players, offering a deeper dive into tech than QQQ’s broader lens.
Its top holdings mirror QQQ’s heavy hitters, with Apple (16.8 %), NVIDIA (13.9%), and Microsoft (13.3%), but its focus stays predominantly on hardware, software, semiconductors, and IT services, with no dilution from other sectors.
VGT’s expense ratio is a razor-thin 0.10%, a hallmark of Vanguard’s cost-conscious ethos, and it has a dividend yield of 0.67%. However, with a tech-heavy focus, it has felt the force of this year's selling pressure even while remaining diversified.
The ETF has fallen over 14% from its 52-week high and just over 10% YTD. Still, this pales compared to NVIDIA’s 17% YTD decline, for example. Including mid-cap stocks in its portfolio adds an interesting growth kicker, appealing to those betting on the next wave of innovation. For investors seeking a tech-only ETF with low costs and broad reach, VGT stands tall.
The XLK: Focusing on S&P 500 Technology Stocks
The Technology Select Sector SPDR Fund (NYSEARCA: XLK) offers a focused take on tech, tracking the Technology Select Sector Index, a subset of the S&P 500. With $66 billion in AUM, XLK holds over 70 large-cap stocks, making it leaner and more concentrated than VGT.
Its top holdings, like QQQ, are heavily concentrated, with Apple (14.4%), NVIDIA (12.9%), and Microsoft (12.8%) comprising over a third of the fund. This top-heaviness amplifies exposure to tech’s most prominent winners and their risks.
XLK’s expense ratio, at 0.09%, closely matches VGT’s, delivering a 0.72% dividend yield. Year-to-date, it’s taken a steeper hit than the QQQs, down nearly 9%, reflecting its reliance on a handful of mega-caps amid the sector’s sell-off. Yet, its long-term performance shines, with annualized returns north of 19% over the past decade.
XLK suits investors who want a concentrated bet on tech’s elite. The S&P 500’s quality filter also provides a layer of stability. It’s less about breadth and more about riding the giants through thick and thin.
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