VGT Beats IYW on Cost, Size and Yield While Matching AI Returns

Context Investors chasing U.S. technology exposure often choose between Vanguard’s Information Technology ETF (VGT) and iShares’ U.S. Technology ETF (IYW). Both track large‑cap tech leaders and include AI‑centric names such as Nvidia and Microsoft. Their recent one‑year total returns sit at 53.30% for VGT and 53.70% for IYW, closely tracking the sector’s rally.

Key Facts - Expense ratio: VGT charges 0.09% of assets, while IYW charges 0.38%, a more than four‑fold difference. - Assets under management: VGT commands $121.3 billion, dwarfing IYW’s $21.4 billion. - Dividend yield: VGT distributes 0.44% of its price annually, compared with IYW’s 0.13%. - Portfolio breadth: VGT holds 310 stocks, 98% of which are pure technology; IYW holds 139 stocks, with 82% tech, 17% communication services and 1% industrials. - Top holdings: Both funds weight Nvidia near 18% and Apple around 15%, but VGT adds Microsoft at 10% while IYW’s largest non‑tech exposure is Alphabet at 7%. - Risk profile: Five‑year beta—VGT 1.32, IYW 1.33—shows similar volatility to the S&P 500. Max drawdown over five years was 35.10% for VGT versus 39.40% for IYW. - Growth of $1,000: Over five years, $1,000 invested in VGT would be worth roughly $2,200; the same amount in IYW would be about $2,400.

What It Means For cost‑sensitive investors, VGT’s sub‑0.1% expense ratio translates into significant fee savings, especially on a $100,000 position where annual costs fall by $310 versus IYW. The larger asset base also implies tighter bid‑ask spreads, reducing trading friction. Yield‑focused investors gain a modest edge with VGT’s 0.44% payout, driven by a $2.41 trailing‑12‑month dividend per share, versus IYW’s $0.27 per share. While the yield gap is small in absolute terms, it compounds over long horizons. Performance parity stems from both funds’ heavy weighting to AI‑driven semiconductor and cloud players. VGT’s tighter focus on pure tech firms, particularly its 33% semiconductor exposure, mirrors the sector’s AI boom, delivering returns that match IYW’s broader tech mix. Choosing between the two hinges on priorities: VGT suits investors who prioritize low cost, larger scale and higher yield, while IYW may appeal to those seeking a slightly broader tech definition that includes communication services and a modest exposure to media.

Watch next: Monitor how upcoming AI hardware cycles and potential regulatory changes to big‑tech earnings affect the relative performance of pure‑tech versus broader‑tech ETFs.