SCHG ETF vs. SPHQ ETF – Outpacing or Shielding the S&P 500?

High-Growth Momentum vs. Defensive Quality: NYSEARCA:SCHG vs. NASDAQ:SPHQ

The competition between the Schwab U.S. Large-Cap Growth ETF (SCHG) and the Invesco S&P 500 Quality ETF (SPHQ) is not just about two tickers—it is about two fundamentally different ways to capture the U.S. equity market in 2025. SCHG delivers concentrated exposure to technology and innovation-led growth, while SPHQ focuses on balance sheet strength, profitability, and consistent earnings. Both have rewarded investors with strong multi-year returns, but the difference in sector weightings, valuations, and volatility profiles means they respond very differently to macroeconomic shifts.

NYSEARCA:SCHG – Tech-Led Expansion and AI Infrastructure Growth

SCHG, priced at $30.21, carries $46 billion in assets under management with an ultra-low 0.04% expense ratio. The ETF has compounded wealth at 16%+ annualized since 2009, outperforming the S&P 500’s ~10% historical average. The fund’s sector breakdown is unapologetically skewed toward technology, with NVIDIA (NVDA) holding a massive 12.3% weight, followed by Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Meta Platforms (META), and Alphabet (GOOG). Over 50% of the allocation is in the tech sector, positioning SCHG as a direct beneficiary of the AI and cloud computing boom.

Performance has been explosive—26.9% annualized gains over the past three years, 16.4% over the last 12 months, and a 10-year return of +346%. AI infrastructure spending is a central driver: IDC estimates the AI chip market could be worth $500 billion by 2028, while Bloomberg Intelligence projects $1.4 trillion in generative AI investments by 2032. SCHG’s top holdings dominate the supply chain for AI—ranging from GPUs and cloud servers to enterprise software and advertising algorithms.

Q2 2025 reinforced the growth story. Mega-cap tech delivered 92% positive EPS surprises, with NVDA posting 69% YoY revenue growth and forecasting another 52% rise in Q3. Microsoft reported record AI adoption rates in Azure, while Alphabet’s Google Cloud saw a 33% YoY jump in enterprise contracts. With its market price trading only 0.07% above NAV, SCHG remains an efficient, liquid vehicle for tech-driven market participation.

NASDAQ:SPHQ – Quality Factor Stability with Broad Sector Diversification

At $56.14 per share, SPHQ manages $14 billion in AUM with a 0.15% expense ratio—slightly higher than SCHG but still low compared to active funds. The ETF tracks the S&P 500 Quality Index, selecting 100 companies with the highest return on equity, low debt, and consistent earnings. This disciplined approach caps each sector at 40%, creating a more balanced portfolio. Technology is still the largest weighting at 25%, but it is complemented by industrials, consumer defensive, and financials.

Top holdings include Apple (AAPL), Adobe (ADBE), Salesforce (CRM), Intuit (INTU), General Electric (GE), and Lockheed Martin (LMT). Over the past 12 months, SPHQ has gained 14%, outperforming other defensive ETFs like the S&P 500 Dividend Aristocrats (+3.1%) and High Dividend (+3.6%). This performance has been driven by strong industrial earnings and resilience in consumer brands during periods of tech market pullbacks.

The macro backdrop in 2025 supports SPHQ’s positioning. The S&P 500 is at 6,380, with many analysts projecting a move toward 7,000 by year-end. Fed rate cut expectations in September, followed by potential additional easing in early 2026, create a tailwind for industrial and consumer sectors. Q2 earnings for the S&P 500 rose 11.7% YoY, with tech and industrials delivering the bulk of the growth—precisely where SPHQ is overweight.

Risk and Return Divergence Between the Two Strategies

SCHG’s 50%+ tech allocation maximizes upside during bull markets but exposes investors to sharper drawdowns if the AI or semiconductor cycle slows. A sector-specific shock could cut 2025 gains quickly. SPHQ’s diversified approach reduces this vulnerability, maintaining a beta below 0.85 and a standard deviation near 12, which is attractive for risk-averse investors.

From 2015 to 2025, SCHG returned over +346%, compared to SPHQ’s lower total return. However, SPHQ’s Sharpe ratio has been competitive, particularly in volatile periods. For instance, during the tech-led selloffs of February and May 2025, SCHG dropped more than 5% from monthly highs, while SPHQ lost less than 2%.

Macro and Policy Catalysts Impacting Both ETFs

Both funds benefit from Trump’s 2025–2026 infrastructure and reshoring incentives. SCHG gains from domestic semiconductor and hyperscaler expansion, while SPHQ benefits from industrial capital expenditures, defense spending, and consumer brand strength. The divergence is in magnitude—SCHG’s gains will be sharper if AI adoption accelerates; SPHQ’s returns will be steadier and more insulated from sector rotations.

If inflation pressures resurface and rate cuts stall, SCHG’s premium valuations—currently around 35x earnings—could compress faster than SPHQ’s 24.7 forward P/E. SPHQ’s broader sector exposure and lower valuation provide a cushion in such a scenario.

Valuation and Forward-Looking Scenarios

SCHG remains more expensive, trading at a growth premium justified by its earnings trajectory but sensitive to macro shocks. SPHQ trades at a more moderate valuation, appealing to those prioritizing capital preservation alongside steady growth. Sector sensitivity analysis suggests SCHG will outperform strongly in tech-led rallies, while SPHQ will perform better in mixed or defensive-led markets.

Buy/Sell/Hold Verdict – NYSEARCA:SCHG vs. NASDAQ:SPHQ

NYSEARCA:SCHG – Buy with $34 Short-Term and $38–$40 Mid-Term Targets

SCHG at $30.21 remains a Buy for investors seeking aggressive growth exposure into year-end 2025. The ETF’s core holdings—NVDA, MSFT, AAPL, AMZN, META, GOOG—are positioned at the center of the AI, cloud, and semiconductor investment cycle, with revenue growth rates in Q2 2025 far exceeding S&P 500 averages. The next catalyst is the September Fed decision, which could trigger a breakout above the $31.50–$32.00 resistance. A sustained move above that level on strong volume would set up a rally toward $34, with further upside toward $38–$40 in a 12–18 month horizon if AI adoption maintains its current trajectory. The risk: a slowdown in semiconductor demand or tighter monetary policy would quickly compress valuations, so position sizing is critical.

NASDAQ:SPHQ – Hold with $59–$60 Near-Term Ceiling

SPHQ at $56.14 earns a Hold rating for now, reflecting its solid fundamentals but limited short-term upside. Its balanced allocation and quality factor tilt make it resilient in market drawdowns, but without a strong catalyst to break the $59–$60 resistance, gains are likely to remain modest in Q3. This ETF is best held as a core portfolio stabilizer while waiting for better entry points during any broad market pullback toward $54–$55. In a volatile macro environment, SPHQ’s risk-adjusted performance remains attractive, especially if tech momentum cools and industrials/defensives lead in late 2025.

Portfolio Strategy Note

In a 60/40 stock-to-bond allocation, SCHG can be sized at 15–20% of equity exposure for aggressive growth capture, while SPHQ fits at 20–25% for stability and downside protection. This barbell approach leverages SCHG’s upside while letting SPHQ absorb shocks during market corrections.

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