Is the iShares Semiconductor ETF or Tech ETF the Better Buy for Investors?
The iShares U.S. Technology ETF (NYSEMKT:IYW) and the iShares Semiconductor ETF (NASDAQ:SOXX) both target the most aggressive growth corners of the market, but with different levels of diversification.
While IYW casts a wider net across the technology sector, SOXX focuses on the 30 largest U.S.-listed semiconductor companies, often leading to more dramatic price swings for investors seeking specialized industry exposure.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The two funds are comparable in terms of fees and income, though SOXX has a slight advantage on both fronts with a lower expense ratio and a marginally higher dividend yield.
Performance & risk comparison
What’s inside
SOXX focuses exclusively on the semiconductor sector, holding just 30 stocks. Its largest positions include Micron Technology, Advanced Micro Devices, and Nvidia. The fund was launched in 2001, and its 0.23% yield has resulted in dividend payments of $1.47 per share over the trailing 12 months.
IYW tracks the broader tech industry and holds a more diversified basket of 148 securities. Its top holdings include Nvidia, Apple, and Microsoft. This fund was launched in 2000 and has paid $0.26 per share in dividends over the trailing 12 months.
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What this means for investors
IYW and SOXX both track technology stocks, but SOXX is narrower, riskier, and potentially more lucrative.
Because SOXX targets only semiconductor stocks, it has the potential for significantly higher returns when the AI sector is booming. While both funds have thrived in recent years, SOXX has more than tripled IYW’s one-year total returns.
The downside to higher earning potential, however, is greater volatility. SOXX is far less diversified than IYW, with just a fraction of IYW’s holdings and a limited focus on one narrow subsector of the market. If AI and semiconductors falter, it will likely lead to steeper downturns for SOXX.
