This is the one discussion I find that most discussions about long-term index investing come back to. While it is tempting to say that “one up, one down” when comparing the US Tech 100 and the S&P 500, it is important to take a more detailed look at their performance.

The easy answer is that the US Tech 100 has had better absolute returns over numerous long periods. However, the whole story is much more complex than a headline return – it encompasses how those returns were achieved, what circumstances led to them and what investors actually had to endure.

What These Two Indices Actually Track

It’s important to recognize what each index is measuring before comparing returns. The US Tech 100, formally known as the Nasdaq-100, tracks the US tech 100 price of the largest non-financial companies listed on the Nasdaq Stock Market. It’s very technology, communications and consumer discretionary heavy. By contrast, the S&P 500 represents 500 large-cap U.S. companies in 11 major economic sectors, including energy, financials, healthcare, industrial, materials, mining, technology, consumer goods, consumer services, retail, telecom, and utilities and real estate.

The Nasdaq-100 is completely devoid of financial companies and has limited commodity exposure but is highly sensitive to interest rate expectations and cycles in technology earnings. That was evident in early 2026, when rising prices for Brent crude, driven by rising tensions around the Strait of Hormuz, shook both indices but had a greater impact on the Nasdaq-100 via its impact on rate expectations and growth valuations.

There are major differences in their structures:

US Tech 100 (Nasdaq-100) – Key Features:

• All 100 constituents are in the Nasdaq exchange
• By index design, excludes financial sector companies
• Market-cap weighted using a modified methodology to reduce the undue concentration in any one market-cap holding
• Re-balancing quarterly and annually in December
• Low dividend yield – constituent companies tend to plow back funds instead of paying dividends.
• Biased toward a handful of high-tech, high market-cap stocks

S&P 500 – Key Features:

• The 500 companies were picked by committee based on their market capitalization, liquidity and profitability
• Has a presence across all 11 GICS sectors, growth- and value-oriented
• Historically has provided a higher dividend yield than tech-heavy indexes
• Committee selection provides oversight and judgment that is lacking in a rules-based index

Each of these structural characteristics dictates how each index will perform during different market conditions and rate cycles and accounts for much of the historical differences in return and drawdown profiles.

Long-Term Return Comparison

The performance has been in favor of the US Tech 100 in most multi-decade windows, especially since the beginning of the recovery from the dot-com collapse. As seen in the table below, the headline numbers are presented as well as important risk metrics.

Numbers are estimates unless otherwise noted and are based on price returns, which do not include dividends reinvested.

Dividends re-invested have accounted for about 40% of the long-term returns of the S&P 500. The difference between the two benchmarks on a total return basis is less than the difference in price, which is especially significant for investors holding dividend reinvesting accounts and especially significant over 20 years or more.

There is also a ten-year period from 2000 to 2010 to consider. Over this period, the Nasdaq-100 had negative cumulative returns, as did the S&P 500, which also fell materially over this period, had much better returns. These 30-year return numbers can change meaningfully over a 10-year period depending on where an investor begins their measurement.

The total for the 2025 full-year figure in the table above is worth dwelling on. The Nasdaq-100 outperformed the S&P 500 with a 21% total return that year and continued its 78% winning streak vs the larger index over the past 18 calendar years. The cumulative total return difference between the Nasdaq-100 and the S&P 500 is 1,258% vs. 531% since the end of 2007 and has been a very persistent performance gap through various market cycles.

Volatility, Drawdowns and Risk Considerations

The risk level of the US Tech 100 has risen significantly since it was established. This isn’t a secondary attribute but a core feature of the index that can affect its performance in declines and whether or not its performance in booms is actually available to each investor.

The Dot-Com Crash as a Historical Reference Point

This 83% drawdown from the top of the March 2000 high to the bottom of the October 2002 low is one of the worst drawdowns in the history of the Nasdaq-100 and in modern equity index history. It was only in early 2015 – about 15 years after the peak – that those losses were recouped in real dollars. The S&P 500 saw declines of some 49% during the same period and reverted to previous highs significantly quicker.

The 2022 Rate-Driven Correction

More recent is the Nasdaq-100’s monetary policy sensitivity, as evidenced by the Fed’s aggressive rate-hike campaign in 2022. That year, the index declined about 33% while the S&P 500 declined about 19%. The sensitivity of valuations to future earnings for technology stocks is magnified in a rising rate environment because it is priced in part, and there is a greater spread in the sensitivity of technology stocks compared to a diversified index, which is structurally baked into the Nasdaq-100.

The 2026 Geopolitical and Trade-Shock Correction

The escalating geopolitical tensions focused on the conflict in the region of the Strait of Hormuz, along with a resurgence of U.S. trade policy uncertainty in late March, propelled the index to a 2026 low around 22,953, a 10% correction from its year-start levels. The S&P 500 dropped about 8% during the same period. Therefore, the 2026 correction was a heavy one on the Nasdaq-100, which is very rate-sensitive. The rise in the price of Brent crude above $113 a barrel has raised inflation fears, which have curbed the monetary easing expectations that have propelled technology stocks in recent times.

The selloff was pretty jaw-dropping, and the ensuing aftermath was just as remarkable. The Nasdaq-100 made an outstanding comeback during March, April and May, and had the best single-month performance in over 23 years in April (+15.7%) alone as AI excitement returned and corporate earnings were robust. The index started in early June 2026 at a record high just over 30,660. As for investors who believe that they can endure the drawdown, the episode highlighted the potential for downside risks and the rapid rate of recovery in this index.

Volatility-Adjusted Returns Over Long Periods

Without a volatility backdrop, raw return numbers provide an incomplete comparison. The Sharpe ratio, which compares the return of an investment against its risk, has been reasonably competitive in the Nasdaq-100 compared to the S&P 500 over holding periods of 15 years and more, indicating that an investment in the Nasdaq-100 has not necessarily resulted in proportionately poorer risk-adjusted returns at very long time horizons. However, the risk-adjusted case is significantly reduced over shorter time horizons, such as for investors who have bought into the market at or close to the top.

Concentration Risk at the Index Level

Looking at the top ten securities in the Nasdaq-100, 52% of the index weight is derived from those ten stocks by year-end 2025, compared with a ~40% share in the index earlier in the decade. Vehicles that are concentrated on a stock can sway the entire index in tandem with company-specific events – such as a company missing earnings, a regulatory decision, or a change in the competitive landscape – to a degree that a 500-stock benchmark might otherwise be capable of absorbing. 

While it’s true that the S&P 500 has become more technology-heavy over the last 10 years, the S&P 500’s broad distribution of names and sectors offers a significant structural buffer. However, even the S&P 500 isn’t without concentration issues: The Magnificent Seven – Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta, and Tesla – currently make up about a third of the S&P 500 by market cap.

Effect of Choosing Different Time Windows

Comparing the performances of these two indices is especially sensitive to the chosen start and end dates. The Nasdaq-100 has a rosy appearance, all but for a 20-year stretch starting shortly after the dot-com bubble burst. Slide the same window back 3 years, and the endpoint is quite different. That’s not to say that overall performance is false, but it’s important to always consider the time frame when looking at headline returns.

• Growing Overlap Between Both Indices

An important change that has been coming into clearer focus since mid-2026: The S&P 500 doesn’t have the same sector mix it used to have. There have been some structural changes that have brought the two indices closer together day-to-day:

• IT and communication services have become a historically heavy component of the S&P 500.
• Major internet companies have been reclassified to other GICS sectors, resulting in a higher technology exposure in the S&P 500.
• The passive growth in the investment base has only served to further entrench the dominance of the large stocks in both indexes, including technology stocks.
• The diversification effect of owning one index relative to the other has been diminished by the increase in correlation during tech-driven market moves.

The daily behavior of the two indices is very similar, yet their volatility profiles are still starkly different. The Nasdaq-100 is still showing wider, more exaggerated swings, both up and down, than its wide cousin, especially during times of sector stress.

One development of note in 2026 that defies the trend of the Magnificent Seven: the group collectively returned around 5.4% for the first half of 2026, compared to the S&P 500’s return of around 7.9% during that same time period. The profits of the seven companies grew at around 18% – the slowest rate since 2022. Now, the tide has turned, and investors are not as keen to invest in AI exposure, but they are interested in the return from AI capital investment, instead of just spending on AI. It’s not quite a structural change, but it’s certainly something that is different than the previous three years.

Factors That Have Driven the Nasdaq-100’s Long-Term Outperformance

The return that the Nasdaq-100 has achieved over the last 20 years has not been due to random variation but identifiable factors:

• The low interest rate environment of around 2009-2021, which caused the long-duration growth assets to become overvalued.
• Structural transformation of the world towards cloud computing, digital services, and software business models.
• The largest tech companies saw amazing operating margin growth during the 2010s
• Less competitive disruption in a few technology segments, in part because of network effects and high switching costs.
• Investment momentum that bolstered the performance of already large index stocks
• The lack of any real inflation pressures for the bulk of the post-financial-crisis period, thus keeping expectations of rates down.

It is not certain if the conditions will be the same over the next decade. At the June meeting, the Federal Reserve, which changed its policy rate’s chair to Kevin Warsh, maintained its benchmark rate at 3.50-3.75% but suggested that it may move up again, a move that defied expectations of additional cuts earlier this year.

The regulatory crackdown against the biggest technology companies has been growing in a number of countries, and the biggest tech companies are already on a scale where the growth rate of future earnings is not as fast as it was in the past. Moreover, there is now a major question on the minds of the markets for Nasdaq-100 stocks: Does the return on investment of the tens of billions of dollars invested in data center infrastructure justify it?

Considerations for Different Types of Investors

There is no objectively better index in all situations. What matters more is which of the indices or which mix of both is suitable to a given investor’s profile.

A few things to keep in mind in making that assessment:

• While the Nasdaq-100 may be able to deliver larger returns in practice over longer time horizons, it can only do so if the investor is willing to hold on for years of moderate underperformance without action. Staying in place is not as easy as it sounds, as the Q1 2026 correction – severe yet brief – is recent proof.
• For people who invest for income, the dividend yield of the S&P 500 is more relevant, especially if their dividends are reinvested over time, which will have a significant cumulative impact after longer time periods.
• Investors already overweight in large-cap technology via individual issues might also want to consider the S&P 500’s more diversified exposure to technology as a factor in the broader sector, as opposed to the Nasdaq-100, which would provide more of a diversification. 
• The complete absence of financials for the Nasdaq-100 presents a genuine sector void that allows any investor to enjoy a good degree of equity market exposure in the United States.
• Both indices have currency exposure to international investors, and the Nasdaq-100 has a concentrated exposure in US technology stocks.

The past performance of either index is not necessarily indicative of the 10-year period to come, and the macroeconomic environment in which the historical record was developed may or may not repeat itself.

Disclaimer

This article is provided for informational and educational purposes only. It does not constitute financial advice, investment guidance, or a recommendation to buy, sell, or hold any financial product, security, or index-linked instrument. All performance figures referenced are approximate, based on publicly available data, and do not account for management fees, transaction costs, taxes, or currency conversion, each of which would affect actual returns. Past performance of any index is not a reliable indicator of future results. Investing in equity indices and index-linked products involves risk, including the possible loss of invested capital. This content does not take into account the specific financial circumstances, objectives, or risk tolerance of any individual reader. Readers are encouraged to conduct independent research and consult a qualified, regulated financial adviser before making any investment.