The Technology Select Sector SPDR Fund (XLK) has delivered the weakest performance among major U.S. tech ETFs in 2025, trailing both the Nasdaq-100 (QQQ) and the iShares U.S. Technology ETF (IYW). The underperformance underscores structural challenges in the broader tech sector.
- XLK is the worst-performing major tech ETF in 2025 with a YTD return of -14.7%
- QQQ outperformed with a 4.3% gain, reflecting stronger AI and software momentum
- IYW delivered a 1.8% return, showing resilience in the technology sector
- XLK’s underperformance is tied to exposure to semiconductors and enterprise infrastructure
- A 16.5-percentage-point gap exists between XLK and QQQ’s YTD returns
- Investors are shifting allocations toward AI and cloud-driven tech segments
The Technology Select Sector SPDR Fund (XLK) has become the worst-performing major technology ETF in 2025, posting a year-to-date decline of 14.7% as of December 6, 2025. In contrast, the Nasdaq-100 ETF (QQQ) has gained 4.3%, while the iShares U.S. Technology ETF (IYW) has posted a modest 1.8% return. This divergence highlights growing investor skepticism toward large-cap tech stocks with heavy exposure to traditional hardware, semiconductors, and infrastructure services. XLK’s underperformance stems from a combination of sector-specific headwinds and shifts in market leadership. While the ETF holds major names like Microsoft, Apple, and Intel, its weight in legacy tech segments has left it vulnerable to slowing demand in enterprise spending and prolonged inventory corrections in semiconductor supply chains. Meanwhile, momentum in artificial intelligence-driven growth stocks—concentrated in QQQ’s broader holdings—has favored more dynamic, software-centric firms. The 16.5-percentage-point gap between XLK and QQQ’s performance reflects a significant rotation away from value-oriented tech exposure. Investors have increasingly favored ETFs with higher allocations to cloud computing, software-as-a-service, and AI infrastructure—areas where IYW has shown resilience despite moderate gains. This trend is affecting portfolio rebalancing strategies, with asset managers and institutional investors adjusting their tech allocations. The divergence may signal a broader shift in tech sector dynamics, where innovation-driven growth is outpacing traditional industrial tech models. As earnings season unfolds, the performance gap could widen further depending on quarterly results from XLK’s heavyweights.