GET DAILY SIGNALSITA vs XLI: Aerospace and Defense Focus Versus Broad Industrial Exposure
Key Takeaways
- ITA is a concentrated, pure-play aerospace and defense ETF, while XLI is a diversified industrial sector ETF spanning machinery, transportation, and electrical equipment.
- ITA carries a higher expense ratio (0.37%) and roughly 54 holdings versus XLI's 0.08% expense ratio and roughly 80+ holdings, giving XLI a clear structural cost and diversification advantage.
- ITA's top-heavy portfolio (about three-quarters of assets in its top 10 names) makes it far more sensitive to defense budgets and commercial aerospace cycles than XLI.
- XLI spreads risk across the broader industrial economy, including electrification, freight, and machinery, reducing single-sector concentration risk.
- Tickeron AI Verdict: XLI — the AI would favor XLI for its lower cost, broader diversification, and multi-theme sector momentum relative to ITA's narrower aerospace and defense focus.
Introduction
Investors comparing ITA and XLI are essentially choosing between two different answers to the same question: how to gain exposure to America's industrial base. These two exchange-traded funds do not compete directly. ITA is a specialized aerospace and defense vehicle, while XLI is a broad industrial sector fund that includes aerospace and defense as only one of several sub-industries. This comparison matters now because industrial capital expenditure, electrification, and defense modernization are all shaping relative positioning within the sector. I also checked this using Tickeron’s AI Screener to see how the two line up on key metrics.
ITA Overview
ITA, issued by BlackRock's iShares, is a passively managed fund that seeks to track the Dow Jones U.S. Select Aerospace & Defense Index. The index is a market-capitalization-weighted measure of U.S. manufacturers, assemblers, and distributors of aircraft and defense equipment. The fund holds approximately 54 positions and is classified as non-diversified, meaning its returns depend heavily on a small number of large names. Its net expense ratio is 0.37%.
The portfolio is heavily concentrated, with roughly 75% of assets in the top 10 holdings. The largest positions are GE (GE Aerospace), RTX (RTX Corporation), BA (Boeing), LMT (Lockheed Martin), NOC (Northrop Grumman), GD (General Dynamics), TDG (TransDigm Group), HWM (Howmet Aerospace), and LHX (L3Harris Technologies). Nearly all assets (about 99%) sit in the industrials sector, making this a pure thematic bet on aerospace and defense rather than a broad industrial allocation.
XLI Overview
XLI, issued by State Street Global Advisors under the SPDR brand, tracks the Industrial Select Sector Index, which is drawn from the industrial companies within the S&P 500. It is a passively managed, market-cap-weighted fund using full replication. The fund holds roughly 80 to 86 positions, is non-diversified by legal classification but far more balanced in practice, and carries a very low net expense ratio of 0.08%.
Top holdings include CAT (Caterpillar), GE (GE Aerospace), RTX (RTX Corporation), GEV (GE Vernova), UNP (Union Pacific), DE (Deere & Company), BA (Boeing), ETN (Eaton), UBER (Uber Technologies), and LMT (Lockheed Martin). Its top 10 holdings account for roughly 40% of assets. By sector, industrials dominate at about 93%, with a smaller technology sleeve (about 6%) reflecting electrical equipment and data-center-oriented names. Aerospace and defense is only about one-quarter of XLI's industry mix, alongside machinery, electrical equipment, ground transportation, and building products.
Industry and Thematic Backdrop
Both funds are shaped by the industrial cycle, but through different lenses. ITA is tied to defense budgets, government procurement, and the commercial aerospace recovery, where supply-chain constraints, aircraft delivery rates, and geopolitical tensions drive sentiment. XLI, by contrast, captures a wider range of catalysts: infrastructure spending, freight and logistics volumes, electrification and grid investment, reshoring of manufacturing, and the rising power demand linked to data centers and artificial intelligence.
In recent market cycles, diversified industrial exposure has benefited from multiple simultaneous themes, whereas aerospace and defense returns have been more concentrated around a handful of large contractors and the Boeing delivery recovery. Key risks differ as well: ITA faces budget-policy and single-stock concentration risk, while XLI carries broader cyclical exposure to economic growth, interest rates, and commodity-linked machinery demand.
Performance and Positioning Comparison
In recent weeks and months, both ETFs have participated in the industrial sector's strength, but their relative positioning has diverged. XLI's broader composition has allowed it to capture momentum across electrification, freight, and data-center infrastructure, smoothing the impact of any single sub-industry. ITA's concentrated aerospace and defense exposure has produced higher sensitivity to defense spending headlines and aircraft production news, leading to more pronounced swings in fund performance.
From a volatility and risk standpoint, ITA's top-heavy structure and non-diversified profile tend to generate larger drawdowns when a major holding, such as Boeing, faces operational setbacks. XLI's wider footprint and lower cost improve its risk-adjusted profile over multi-year horizons. For investors, the choice hinges on whether they want targeted thematic exposure to defense and aerospace or diversified participation in the full industrial economy.
Tickeron AI Verdict
Based on observable structural factors, Tickeron's AI would likely favor XLI over ITA in the current environment. XLI offers a materially lower expense ratio, broader diversification across multiple industrial sub-sectors, and exposure to several concurrent growth themes, including electrification, infrastructure, and data-center power demand. While ITA provides stronger direct leverage to defense modernization and commercial aerospace, its higher cost and heavy concentration in a handful of large contractors elevate single-name and sector-specific risk. On a probability-weighted basis, XLI's combination of cost efficiency, diversification, and multi-theme momentum represents the more balanced risk-adjusted positioning for most investors.
Using AI Tools for ETF Comparisons
When analyzing sector ETFs like these, I often turn to Tickeron’s AI Screener to filter holdings by metrics such as expense ratios, concentration, and thematic exposure. It helps surface relative strengths quickly without manual number crunching. The tool supports scans across industries and can highlight opportunities that align with specific risk preferences.
Disclaimer
The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.
Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
XLI in upward trend: price may jump up because it broke its lower Bollinger Band on November 05, 2026
XLI may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options. In 33 of 37 cases where XLI's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued upward trend are 89%.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator is in the oversold zone. Keep an eye out for a move up in the foreseeable future.
Following a +2.34% 3-day Advance, the price is estimated to grow further. Considering data from situations where XLI advanced for three days, in 277 of 334 cases, the price rose further within the following month. The odds of a continued upward trend are 83%.
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on November 05, 2026. You may want to consider selling the stock, shorting the stock, or exploring put options on XLI as a result. In 69 of 89 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are 78%.
The Moving Average Convergence Divergence Histogram (MACD) for XLI turned negative on November 06, 2026. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 46 similar instances when the indicator turned negative. In 34 of the 46 cases the stock turned lower in the days that followed. This puts the odds of success at 74%.
XLI moved below its 50-day moving average on November 04, 2026 date and that indicates a change from an upward trend to a downward trend.
The 50-day moving average for XLI moved below the 200-day moving average on October 22, 2026. This could be a long-term bearish signal for the stock as the stock shifts to an downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where XLI declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 78%.
The Aroon Indicator for XLI entered a downward trend on October 16, 2026. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
Category Industrials
Advertisement