A Complete Guide to Technology ETFs

Technology stocks have dominated U.S. equity markets for the past two decades. From the rise of smartphones and cloud computing to breakthroughs in artificial intelligence, tech has transformed not only the global economy but also the composition of investment portfolios.

As a result, technology ETFs are now a core building block for many investors. Whether you're seeking broad sector exposure or looking to bet on specific themes like cybersecurity or AI, there’s likely a fund tailored to your view.

This guide breaks down the landscape of technology ETFs, explains how they’re constructed, highlights major funds and helps you figure out which ones might belong in your portfolio.

What Is a Technology ETF?

A technology ETF is a fund that holds a basket of technology-related stocks.

These ETFs can be:

• Broad-based tech sector ETFs that include diversified holdings across various tech industries
• Thematic tech ETFs that target narrower areas like cloud computing, semiconductors or fintech
• Niche or leveraged ETFs designed for tactical exposure or trading strategies

How Technology ETFs Are Constructed

The construction of a tech ETF starts with its underlying index. Most funds use rules-based indexes that define which companies qualify as “technology” and how they should be weighted.

Classification Systems

Different index providers classify tech stocks in slightly different ways. For example:

• GICS (Global Industry Classification Standard) puts Apple Inc. (AAPL) and Microsoft Corp. (MSFT) in the information technology sector but puts Alphabet Inc. (GOOGL) and Meta Platforms Inc. (META) in communication services.
• FTSE Russell includes some software names in the technology sector and others in consumer discretionary or industrials.

This means even a “tech ETF” may not include all the companies you think of as tech.

Market-Cap vs. Equal Weighting

Most technology ETFs are market-cap weighted, meaning giants like Apple, Microsoft and Nvidia Corp. (NVDA) dominate the portfolio. But some funds use equal weighting to give smaller companies more influence, such as the Invesco S&P 500 Equal Weight Technology ETF (RSPT).

Active vs. Passive

While most tech ETFs are passively managed, a growing number are actively managed, giving portfolio managers discretion to pick stocks or time the market. Examples include:

• ARK Innovation ETF (ARKK)—a thematic tech-heavy active ETF
• iShares Technology Opportunities Active ETF (TEK)—a high-growth tech portfolio

The Heavyweights: Broad Tech ETFs

For investors seeking broad exposure to the tech sector, these ETFs are the most widely used:

• Technology Select Sector SPDR Fund (XLK)—Tracks the tech portion of the S&P 500; heavy on Apple and Microsoft; low-cost and highly liquid.
• Vanguard Information Technology ETF (VGT)—Tracks MSCI’s broader tech index; includes more names than XLK but is also heavily concentrated in Apple and Microsoft
• Fidelity MSCI Information Technology Index ETF (FTEC)—Similar to VGT with slight differences in weightings and methodology

These ETFs are the backbone of tech exposure for many portfolios. They tend to have low expense ratios, tight spreads and deep liquidity.

Going Deeper: Industry-Specific Tech ETFs

If you want more targeted exposure, there are dozens of ETFs focused on specific slices of the tech world. Some of the most popular include:

Semiconductors

• iShares Semiconductor ETF (SOXX)—Tracks major chipmakers like Nvidia, Broadcom Inc. (BRCM) and Intel Corp. (INTC); a top choice for chip exposure
• VanEck Semiconductor ETF (SMH)—Similar to SOXX but tracks a slightly different index; both have high overlap

Cloud Computing

• First Trust Cloud Computing ETF (SKYY)—Focuses on companies offering cloud infrastructure and software services

Cybersecurity

• Amplify Cybersecurity ETF (HACK)—Tracks companies providing digital security solutions
• First Trust Nasdaq Cybersecurity ETF (CIBR)—Similar to HACK with slightly different inclusion criteria and weightings

Artificial Intelligence

• Global X Robotics & Artificial Intelligence ETF (BOTZ)—Invests in firms involved in robotics and AI
• iShares Future AI & Tech ETF (ARTY)—Exposure to the full value chain of companies involved with AI

Other Themes

There are ETFs focused on fintech, quantum computing, e-commerce and even the metaverse. While some of these are speculative or unproven, they can offer upside in a bull market.

Global vs. U.S. Technology Exposure

Most major tech ETFs are U.S.-focused, but investors can access international technology stocks, too.

• iShares Global Tech ETF (IXN) includes non-U.S. tech giants like ASML Holding (ASML) and Taiwan Semiconductor Manufacturing Co. (TSMC).
• Emerging market tech ETFs, such as the KraneShares China Internet ETF (KWEB), offer access to fast-growing but volatile markets like China, India and Southeast Asia.

Tech ETF Performance and Risk

Tech ETFs have outperformed the broader market over the past 10-15 years thanks to strong earnings growth and rising valuations.

But tech is also volatile. The sector tends to underperform when:

• Recession fears increase (tech earnings often get revised lower)
• Regulation ramps up (particularly for "big tech")

In 2022, for example, tech ETFs like XLK and the Invesco QQQ Trust (QQQ) saw steep drawdowns amid rising interest rates and recession fears.

Costs

Tech ETFs tend to be cheap and efficient, especially the large broad-based ones. XLK, VGT and FTEC have expense ratios under 0.1%. Thematic ETFs often charge more—up to 0.75% or higher.

When to Use Technology ETFs

Tech ETFs can serve multiple purposes:

• Core growth allocation: Broad tech ETFs like XLK and VGT can be long-term portfolio anchors.
• Tactical tilts: Use sector-specific ETFs to express a short- or medium-term view.
• Thematic bets: Add exposure to emerging trends like AI or cybersecurity.

However, investors should understand the concentration risk and potential for sharp drawdowns. Tech ETFs are not guaranteed winners, even with long-term tailwinds behind the sector.

Conclusion

Technology ETFs offer a powerful way to invest in one of the most dynamic parts of the global economy. From the largest megacaps to fast-growing upstarts, from broad sector funds to hyper-focused thematic plays, there’s a tech ETF for nearly every investor goal.

But as with all ETFs, it’s crucial to understand what you own. Look under the hood, check the strategy and review the holdings. 

And be sure to check out etf.com’s Technology Topics Page to find the right tech ETF for you.