Better Artificial Intelligence ETF: iShares Semiconductor vs. the Fidelity MSCI Information Technology Index

A comparison of the Fidelity MSCI Information Technology Index ETF (FTEC) and the iShares Semiconductor ETF (SOXX) highlights differing strategies for AI sector exposure. FTEC offers broader diversification across the U.S. tech sector, including non-semiconductor AI beneficiaries, and a significantly lower expense ratio of 0.08% versus SOXX's 0.34%. While SOXX provides concentrated semiconductor exposure, leading to higher volatility but also a stronger 1-year return (28.64% vs. FTEC's 26.99%), the analysis favors FTEC for its diversified approach and cost efficiency despite the current semiconductor-driven AI boom.

Analysis

The Fidelity MSCI Information Technology Index ETF (FTEC) and the iShares Semiconductor ETF (SOXX) present differing strategies for artificial intelligence sector exposure. FTEC offers broad U.S. technology sector coverage with 288 holdings, including Nvidia, Microsoft, and Apple, while SOXX provides a concentrated bet on 35 semiconductor companies like AMD, Broadcom, and Nvidia. FTEC maintains a significantly lower expense ratio of 0.08% compared to SOXX's 0.34%.

SOXX has demonstrated stronger recent performance, achieving a 28.64% one-year return versus FTEC's 26.99% as of October 31, 2025, and a higher 5-year growth of $1,000 ($2,842 vs. $2,568). However, SOXX exhibits higher volatility, with a maximum drawdown of 45.75% over five years, notably greater than FTEC's 34.95%, reflecting its concentrated semiconductor exposure.

Both ETFs provide AI exposure, but FTEC's strategy encompasses both semiconductor providers and broader tech companies benefiting from AI, such as Palantir, which saw a 200% share increase. While SOXX capitalizes on strong tailwinds for specialized AI chips, FTEC offers diversified upside by including non-semiconductor companies like Microsoft. The analysis concludes FTEC's combination of diversification and lower fees makes it a potentially more robust choice for long-term AI sector exposure.

Key Decisions for Investors

• Investors seeking diversified exposure to the AI sector with lower costs should favor FTEC, which includes both semiconductor and broader tech beneficiaries like Palantir and Microsoft.
• Those with a higher risk tolerance and conviction in the continued outperformance of pure-play semiconductors may consider SOXX for its concentrated exposure, despite its higher expense ratio and volatility.
• Monitor the ongoing demand for specialized AI chips and the broader tech sector's integration of AI, as this will influence the relative performance of concentrated semiconductor funds versus diversified tech ETFs.
• Evaluate the trade-off between SOXX's historical higher returns (e.g., 5-year growth of $1,000 to $2,842) and its significantly higher maximum drawdown (45.75%) when assessing risk-adjusted returns.