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This article identifies and analyzes the five best semiconductor ETFs on the market.
Best Semiconductor ETFs: Background
Semiconductor ETFs are exchange-traded funds that invest in companies involved in designing, manufacturing, or producing semiconductors.
Semiconductor ETFs provide narrow diversification across a historically volatile industry.
Investors bullish on the entire semiconductor industry may opt for a semiconductor ETF versus owning individual stocks in the space.
According to our research, here are the five best semiconductor ETFs:
- iShares Semiconductor ETFs (SOXX)
- VanEck Vectors Semiconductor ETF (SMH)
- Direxion Daily Semiconductor Bull 3X Shares (SOXL)
- SPDR S&P Semiconductor ETF (XSD)
- Invesco Dynamic Semiconductor ETF (PSI)
Next, we’ll review each of these in more detail.
Best Semiconductor ETFs
#1. iShares Semiconductor ETF (SOXX)
- 1-Year Trailing Performance: -29%
- Expense Ratio: 0.40%
- Assets Under Management: $5.4 billion
The iShares Semiconductor ETF provides targeted access to U.S. companies designing, manufacturing, and distributing semiconductors.
It is the largest semiconductor ETF by AUM and has a favorable expense ratio relative to other funds in this article.
Its top holdings are the core semiconductor stocks you’d expect, but it has a relatively small allocation to TSMC, the world’s largest semiconductor manufacturer — just 3.7%.
We like the significant allocation to NVIDIA in SOXX. We believe it sits amongst the best semiconductor stocks, and the market agrees.
It is the dominant player in the GPU space, and we expect it to power the future of the high-performance computing, data center, cloud, and gaming industries.
SOXX Top Holdings:
- Texas Instruments (TXN) 8.74%
- Broadcom (AVGO) 8.56%
- NVIDIA (NVDA) 7.38%
- Qualcomm (QCOM) 6.00%
- Advanced Micro Devices (AMD) 4.79%
#2. VanEck Vectors Semiconductor ETF (SMH)
- 1-Year Trailing Performance: -29%
- Expense Ratio: 0.35%
- Assets Under Management: $6.2 billion
The VanEck Vectors Semiconductor ETF invests in companies involved in semiconductor production and equipment.
The main difference between SMH and SOXX is their respective allocations to TSMC.
The large allocation to a company with growing geopolitical risks might scare off some investors.
However, TSMC is the epicenter of the semiconductor industry; some investors might want their ETF to be weighted accordingly.
SMH also has a slightly lower expense ratio than SOXX. That is information to consider if you’re sensitive to fees.
SMH Top Holdings:
- TSMC (TSM) 9.82%
- NVIDIA (NVDA) 8.75%
- ASML (ASML) 5.64%
- Texas Instruments (TXN) 5.29%
- Qualcomm (QCOM) 5.10%
#3. Direxion Daily Semiconductor Bull 3X Shares (SOXL)
- 1-Year Trailing Performance: N/A
- Expense Ratio: 0.90%
- Assets Under Management: $3.6 billion
The Direxion Daily Semiconductor Bull 3X Shares (SOXL) seeks 300% of the semiconductor industry’s daily investment results.
SOXL is a 3x leveraged ETF designed for single-day trading and should not be used for periods greater than a day.
This means that if the index that SOXL tracks increases 3% in a day, SOXL will be up 9% that given day. The math works the other way, too.
Direxion provides the inverse of this ETF as well: the Daily Semiconductor Bear 3X Shares ETF (SOXS).
This inverse fund is for traders that think the semiconductor industry is in for a bad day of trading and want to short it with leverage.
SOXL Top Holdings:
- Dreyfus Government Secs Cash Management Admin (DGCXX) 19.93%
- Goldman Sachs Treasury Instruments (FTIXX) 13.88%
- Mutual Fund (N/A) 13.68%
- Texas Instruments (TXN) 4.75%
- Broadcom (AVGO) 4.65%
#4. SPDR S&P Semiconductor ETF (XSD)
- 1-Year Trailing Performance: -27%
- Expense Ratio: 0.35%
- Assets Under Management: $962 million
The SPDR S&P Semiconductor ETF tracks a modified equal-weighted index to provide unconcentrated industry exposure across large, mid, and small-cap stocks.
XSD’s equal-weighting structure is its differentiator. Gains in Nvidia and AMD will have similar effects as gains in small-cap, lesser-known semiconductor stocks.
Risk comes in all flavors, but small-caps are typically more volatile on the upside and downside than $100+ billion companies.
Another perspective would suggest that XSD is a great option for bullish investors in the semiconductor industry but believe Nvidia, AMD, Broadcom, and Qualcomm might be overvalued in the short term.
Investing in XSD gets their capital off the sidelines while mitigating their perceived risk of the high-flying names experiencing a painful pullback.
XSD Top Holdings:
- Rambus (RMBS) 3.64%
- Diodes (DIOD) 3.27%
- MACOM Technology Solutions (MTSI) 3.12%
- Impinj (PI) 3.12%
- First Solar (FSLR) 3.10%
#5. Invesco Dynamic Semiconductors ETF (PSI)
- 1-Year Trailing Performance: -29%
- Expense Ratio: 0.56%
- Assets Under Management: $437 million
The Invesco Dynamic Semiconductor ETF invests in semiconductor companies based on investment criteria like price momentum, earnings momentum, quality, management action, and value.
The fund has similar holdings to SOXX and SMH, the first and second ETFs in this article, but is less concentrated in the industry-leading names.
PSI is the happy medium between the equal-weighted XSD and the highly concentrated SOXX and SMH.
It’s the smallest ETF in this article with AUM around $600 million, and commands a significantly higher expense ratio than the other funds that share its objective (essentially all but the Direxion SOXL day-trading vehicle).
PSI Top Holdings:
- Texas Instruments (TXN) 5.34%
- Micron Technology (MU) 5.33%
- Broadcom (AVGO) 5.09%
- Analog Devices (ADI) 5.03%
- Applied Materials (AMAT) 5.02%
Advantages of Investing in a Semiconductor ETF
Individual semiconductor stocks are more volatile than your average stock due to their complex supply chain that consists of many bottlenecks, among other things.
Owning a semiconductor sector ETF spreads your risk and reward across the entire industry, which makes your portfolio more impervious to individual stocks free-falling.
The Risks of Investing in Semiconductor ETFs
Depending on your risk profile, there are also disadvantages to owning a semiconductor ETF.
There are going to be individual stocks within the fund that significantly outperform the ETF itself.
Greed and crystal-clear hindsight will have you kicking yourself for not buying into the individual names that carry the fund over a given duration, but there are tradeoffs to investing.
It’s up to you to decide which are more important or appropriate for your investing goals.
Frequently Asked Questions
What is the best Semiconductor ETF?
The best semiconductor ETFs are iShares Semiconductor ETF (SOXX), VanEck Vectors Semiconductor ETF (SMH), SPDR S&P Semiconductor ETF (XSD), and Invesco Dynamic Semiconductors ETF (PSI).
Is there an ETF for semiconductors?
Yes, there is an ETF for semiconductors called the iShares Semiconductor ETF (SOXX).
What is the best semiconductor stock to invest in?
The best semiconductor stocks to invest in are NVIDIA (NVDA), Advanced Micro Devices (AMD), TSMC (TSM), ASML Holdings (ASML), Broadcom (AVGO), Qualcomm (QCOM), and Apple (AAPL).
What ETF holds TSMC?
TSMC is one of the largest companies in the world and is held in hundreds of ETFs. It is a primary holding in the VanEck Vectors Semiconductor ETF (SMH), making up 11% of the fund.
Bottom Line: Best Semiconductor ETFs
Each of these semiconductor ETFs provides various types of exposure to an accelerating industry.
We think SOXX or SMH are your best options if you’re seeking sector-wide semi gains.
This article is for informational purposes only. It is not intended to be investment advice. To learn more about how we evaluated the best semiconductor ETFs, check out our editorial guidelines and public equities research methodology.
This article was updated on October 31, 2022 to reflect the changes in performance and characteristics of each fund.
