ARKK, QQQ, or XLK: Which is the Best Tech ETF Right Now?

Business Insider

a day ago

As tech stocks power the market to record highs, leading tech ETFs —including the Ark Innovation ETF (ARKK), Invesco QQQ Trust (QQQ), and Technology Select Sector SPDR Fund (XLK) —are all posting impressive gains. ARKK stands out with a staggering 87% return over the past year, far outpacing QQQ's 28.4% and XLK's 29.2%. Past performance aside, the focus now shifts to which ETF presents the best opportunity ahead.
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Ark Innovation (ARKK)
Managed by high-profile tech investor Cathie Wood, the $7.3 billion Ark Innovation ETF (ARKK) is having a banner year, up 87% over the past 12 months. ARKK is actively managed, meaning that Wood and her team actively pick the ETF's holdings and make trades as they see fit, rather than relying on a passive index approach.
The ETF currently holds 42 stocks, and its top 10 holdings account for 58.5% of assets.
Below, you'll find an overview of ARKK's top 10 holdings using TipRanks' holdings tool.
ARKK bills itself as a 'disruptive innovation' ETF. As you can see, many of its top 10 holdings are disruptive technology stocks such as Tesla (TSLA), Coinbase (COIN), Palantir (PLTR), Roblox (RBLX), Tempus (TEM), or Robinhood (HOOD).
While the fund's recent performance has been strong—helped by a surge in many of its holdings during 2025—its long-term track record of annualized returns has been mixed.
As of the most recent monthly close (July), ARKK has delivered an impressive 18.6% annualized return over the past three years (in addition to its 43% price gain). However, the picture changes over longer horizons: its five-year annualized return is -0.8%, and over ten years it has posted a respectable 14.5% annualized gain.
ARKK charges a 0.75% expense ratio, meaning an investor with $10,000 in the fund will pay $75 in annual fees. Because it is actively managed, its costs are higher than passive peers like QQQ and XLK—but even so, 0.75% is steep. Over time, these fees compound. If the expense ratio stays the same and the fund returns 5% annually, that same $10,000 investment would incur about $930 in fees over a decade—a meaningful amount.
I like several of ARKK's current holdings and give Cathie Wood's team credit for identifying promising stocks ahead of the curve. Still, there are notable drawbacks. The active approach means the portfolio's composition can change quickly, with no guarantee of holding winners for the long term. Performance over extended periods has been uneven, as shown by the negative five-year annualized return. And the 0.75% fee remains high compared with cheaper alternatives.
Is the ARKK ETF a Good Buy?
Turning to Wall Street, ARKK earns a Moderate Buy consensus rating based on 35 Buys, eight Holds, and zero Sell ratings assigned in the past three months. The average ARKK stock price target of $87.18 implies almost 12% upside potential.
Invesco QQQ Trust (QQQ)
Unlike ARKK, the $360 billion QQQ is an index fund that simply invests in the Nasdaq-100 Index, an index of the 100 largest non-financial companies listed on the Nasdaq. QQQ currently holds 101 positions, and its top 10 holdings make up just over half of the fund. You'll find an overview of QQQ's top 10 holdings below.
QQQ's top holdings are dominated by the mega-cap tech names that make up the 'Magnificent Seven.' While it leans more toward established tech giants than ARKK, it still includes some of the same high-growth 'disruptors' found in ARKK's portfolio—such as Tesla (TSLA), Palantir (PLTR), and Advanced Micro Devices (AMD).
Where QQQ truly stands apart is in performance. As of the most recent monthly close, its three-year annualized return is 22.2%, outpacing ARKK's 18.6%. Over five years, the gap widens dramatically: QQQ posted a robust 17% annualized return, while ARKK came in at -0.8%. Over a decade, QQQ's 18.5% annualized return also beats ARKK's 14.5%.
QQQ is also significantly more cost-efficient. Its 0.20% expense ratio means a $10,000 investment costs just $20 per year in fees. Over 10 years—assuming a 5% annual return—fees would total about $255, compared with $930 for ARKK.
Overall, I'm bullish on QQQ. Its combination of a diverse portfolio of top-tier growth stocks, an outstanding performance history, and a low expense ratio makes it an appealing choice for long-term investors.
Is the QQQ ETF a Good Investment?
QQQ also earns a Moderate Buy consensus rating based on 92 Buys, 10 Holds, and zero Sell ratings assigned in the past three months. The average QQQ stock price target of $636.15 implies ~9.5% upside potential.
Technology Select Sector SPDR (XLK)
Lastly, let's take a look at the Technology Select Sector SPDR Fund ETF (XLK) from State Street (STT). Like QQQ, this is an index fund that invests in the technology sector of the S&P 500 (SPX). XLK has $85 billion in AUM. XLK owns 69 stocks, and its top 10 holdings, which you'll find below, account for 65.2% of the fund.
XLK holds many of the same mega-cap tech names as QQQ and shares some top-10 positions with ARKK, including Palantir (PLTR) and Advanced Micro Devices (AMD). It also features large stakes in other tech heavyweights like Oracle (ORCL) and IBM (IBM). Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL) dominate the fund, each with double-digit weightings.
Where XLK really shines is in long-term performance—outpacing both ARKK and QQQ across the three, five, and 10-year horizons. As of the end of July, XLK delivered a 23.1% annualized return over three years, topping ARKK's 18.6% and edging out QQQ's 22.2%. Its five-year annualized return of 19.9% easily beats QQQ's 17% and crushes ARKK's -0.8%. Over a decade, XLK's stellar 21.4% annualized return leaves QQQ's 18.5% and ARKK's 14.5% in the dust.
Despite leading the pack in performance, XLK is also the cheapest option here, with a rock-bottom expense ratio of just 0.08%. On a $10,000 investment, that's only $8 per year in fees. Over 10 years—assuming a 5% annual return—fees would total just $103, compared with $255 for QQQ and $930 for ARKK.
Given its unbeatable combination of best-in-class returns and the lowest cost by far, I'm bullish on XLK as the standout choice in this comparison.
Is the XLK ETF a Good Buy?
XLK earns a Moderate Buy consensus rating based on 61 Buys, 9 Holds, and zero Sell ratings assigned in the past three months. The average XLK ETF price target of $294.12 implies almost 10% upside potential.
Choosing a Winner
While ARKK has been the standout performer over the past year, its long-term record is uneven—reflected in its negative five-year annualized return. In contrast, QQQ and XLK have delivered steadier, more reliable gains over time.
ARKK also carries a much higher price tag than its peers. Between the two stronger long-term performers, I'm bullish on all three ETFs, but XLK comes out on top thanks to its best-in-class long-term returns and rock-bottom expense ratio.