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Semiconductor ETFs have been gaining popularity among investors in recent years, thanks to the rapid growth of the semiconductor industry.
As the foundation for various electronic devices, the growing demand for semiconductors is projected to drive the sector to $911 Billion by 2027, with a CAGR of 8% from 2022.
For many, this presents a compelling investment opportunity. Semiconductor ETFs offer diversified exposure to semiconductor stocks, making them attractive for investors seeking high-growth opportunities.
This article will review the top semiconductor ETFs in 2024, assessing their performance, investment strategy, and holdings.
What is a semiconductor ETF?
Exchange-traded funds (ETFs) are investment funds that are traded on stock exchanges. Semiconductor ETFs are a type of ETF that invests in companies that are involved in the semiconductor industry. These ETFs expose investors to the semiconductor industry without needing to pick individual stocks.
Semiconductor ETFs are usually diversified, which means they invest in a wide range of semiconductor companies. These ETFs include companies involved in testing, distributing, designing, and implementing semiconductors. The extent of involvement in the semiconductor industry for each varies per ETF.
Best Semiconductor ETF Summary
| Expense Ratio | 1-Year (Returns) | Dividend Yield | |
|---|---|---|---|
| VanEck Semiconductor ETF (SMH) | 0.35% | 54.67% | 0.60% |
| iShares Semiconductor ETF (SOXX) | 0.19% | 46.30% | 0.81% |
| SPDR S&P Semiconductor ETF (XSD) | 0.35% | 0.35% | 0.63% |
| Invesco Semiconductors ETF (PSI) | 0.35% | 28.38% | 0.42% |
| First Trust Nasdaq Semiconductor ETF (FTXL) | 0.60% | 35.42% | 0.63% |
The table above shows you a high-level view of the best semiconductor ETFs on the market today. If you want to minimize expenses, SOXX is the best option, with an expense ratio of 0.19% compared to 0.35% or 0.60% of the other ETFs.
Likewise, we can also see that based on the 1-year returns, SMH and SOXX were the top two performing ETFs. SMH has a 1-year return of 54.67%, and SOXX has a 1-year return of 46.30% compared to the other ETFs, with the next highest 1-year returns coming from FTXL at 35.42%.
Over a longer period of 5 years, SMH and SOXX generated higher total returns similar to the short term. SMH generated the highest 1-year return with 31.62%, followed by SOXX with 29.00%. All other ETFs on this list generated a 5-year return of nearly 25%. By investing in SOXX or SMH, you can generate between 4% and 6% additional returns.
Based on the performance and expense ratio, investing in any ETF would be a good investment. Still, it’s clear that SMH and SOXX generate slightly higher returns compared to the others.
VanEck Semiconductor ETF (SMH)
| SMH | |
|---|---|
| Diversification | MVIS US Listed Semiconductor 25 |
| Expense Ratio | 0.35% |
| SEC Yield | 0.58% |
| 1-Year (Returns) | 54.67% |
| 5-Year (Returns) | 31.62% |
| 10-Year (Returns) | 24.95% |
| Dividend Yield | 0.60% |
| Dividend Growth Rate 5Y (CAGR) | 4.95% |
The VanEck Semiconductor ETF (SMH) is an exchange-traded fund that VanEck manages.
The ETF follows a full replication method and tracks the performance of the MVIS US Listed Semiconductor 25 Index.
The index is designed to track the overall performance of companies involved in semiconductor production and equipment.
The index does this by tracking the performance of the semiconductor industry’s 25 largest and most liquid public companies. The company must generate at least 50% of its revenue from semiconductors or equipment to be included in the ETF. One important note of this index is that each company’s weight is capped at 20%.
Overall, the ETF holds approximately 25 stocks, and currently, some of the largest holdings are Nvidia Corp, Taiwan Semiconductor Manufacturing Co, Boardroom Inc, and Advanced Micro Devices Inc.
SMH Holdings
| Company | % of Portfolio |
|---|---|
| Nvidia Corp | 21.80% |
| Taiwan Semiconductor Manufacturing Co L | 9.54% |
| Advanced Micro Devices Inc | 6.05% |
| Broadcom Inc | 6.04% |
| Intel Corp | 4.92% |
| Asml Holding Nv | 4.67% |
| Lam Research Corp | 4.42% |
| Qualcomm Inc | 4.37% |
| Applied Materials Inc | 4.33% |
| Texas Instruments Inc | 4.18% |
| Total | 70.32% |
The SMH ETF holds approximately 26 holdings as of Jan 2024—the top 10 holdings of the ETF account for approximately 70% of the total assets. This means that the other 16 holdings account for only 30% of the portfolio. The largest holding was Nvidia Corp, which accounts for 22% of the portfolio.
iShares Semiconductor ETF(SOXX)
| SOXX | |
|---|---|
| Diversification | NYSE Semiconductor Index |
| Expense Ratio | 0.19% |
| SEC Yield | 0.82% |
| 1-Year (Returns) | 46.30% |
| 5-Year (Returns) | 29.00% |
| 10-Year (Returns) | 24.10% |
| Dividend Yield | 0.81% |
| Dividend Growth Rate 5Y (CAGR) | 15.97% |
iShares Semiconductor ETF, or SOXX, is an exchange-traded fund managed by iShares. The ETF tracks the performance of the ICE semiconductor index, which is composed of U.S-listed equities in the semiconductor sector.
SOXX Holdings
| Company | % of Portfolio |
|---|---|
| Advanced Micro Devices Inc | 9.50% |
| Broadcom Inc | 8.74% |
| Nvidia Corp | 8.64% |
| Qualcomm Inc | 6.40% |
| Intel Corporation Corp | 5.94% |
| Marvell Technology Inc | 4.33% |
| Micron Technology Inc | 3.94% |
| lam Research Corp | 3.88% |
| Texas Instrument Inc | 3.87% |
| Kla Corp | 3.83% |
| Total | 59.07% |
The SOXX ETF holds approximately 30 holdings as of Jan 2024—the top 10 holdings of the ETF account for approximately 59% of the total assets. This means that the other 20 holdings account for only 41% of the portfolio. Advanced Micro Devices Inc was the largest holding, accounting for 10% of the portfolio.
Overall, this ETF is quite diversified into top holdings, with the highest holding only receiving 10%. Other ETFs, on the other hand, such as SMH, have a top holding of over 22%.
Invesco PHLX Semiconductor ETF (SOXQ)
| SOXQ | |
|---|---|
| Diversification | NYSE Semiconductor Index |
| Expense Ratio | 0.35% |
| SEC Yield | 0.85% |
| 1-Year (Returns) | 46.65% |
| 5-Year (Returns) | - |
| 10-Year (Returns) | - |
| Dividend Yield | 0.90% |
| Dividend Growth Rate 5Y (CAGR) | - |
The Invesco PHLX Semiconductor ETF, or SOXQ, is an exchange-traded fund that Invesco manages. The fund tracks the performance of the PHLX Semiconductor Sector Index, which includes the 30 largest U.S.-listed companies engaged in the semiconductor sector.
To be a part of the Index, companies must focus on designing, distributing, manufacturing, and selling semiconductors. Those companies included in the index must also have a minimum market capitalization of $100 Million.
SOXQ is different from some of the other funds on this list for two reasons.
First, it is a bit broader and has more holdings in the overall semiconductor market. The second difference is that the fund was started in 2021, which means it only has approximately three years of historical performance, whereas many other funds on this list have at least ten years of performance.
SOXQ Holdings
| Company | % of Portfolio |
|---|---|
| Advanced Micro Devices Inc | 9.49% |
| Broadcom Inc | 8.74% |
| NVIDIA Corp | 8.63% |
| QUALCOMM Inc | 7.82% |
| Intel Corp | 7.39% |
| Marvell Technology Inc | 4.33% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 4.11% |
| Micron Technology Inc | 3.94% |
| Lam Research Corp | 3.88% |
| Texas Instruments Inc | 3.86% |
| Total | 62.19% |
The SOXQ ETF holds approximately 30 holdings as of Jan 2024—the top 10 holdings of the ETF account for approximately 62% of the total assets. This means that the other 20 holdings account for only 38% of the portfolio. The largest holding was Advanced Micro Devices Inc., which accounts for 10% of the portfolio.
Overall, this ETF is quite diversified but it does hold a very similar portfolio to SOXX. SOXQ holds 9 of the same top holdings as SOXX.
SPDR S&P Semiconductor ETF (XSD)
| XSD | |
|---|---|
| Diversification | S&P Semiconductor Select Industry Index |
| Expense Ratio | 0.35% |
| SEC Yield | 0.25% |
| 1-Year (Returns) | 14.79% |
| 5-Year (Returns) | 25.52% |
| 10-Year (Returns) | 22.01% |
| Dividend Yield | 0.33% |
| Dividend Growth Rate 5Y (CAGR) | -1.36% |
SPDR S&P Semiconductor ETF, or XSD, is an exchange-traded fund managed by State Street Global Advisors that tracks the performance of the S&P Semiconductor Select Industry Index.
This index is designed to track a subset of a total market. To do this, the index only induces stocks that are a part of the S&P Total Market Index classified in the GICS semiconductor sub-industry. This approach allows the index to invest in various large, mid, and small capitalization companies.
The index holds approximately 30 stocks; the fund uses a sampling strategy, which means that it does not hold every stock from the index. Rather, it samples the index to create a fund with a similar risk-to-return ratio. As a result, the fund may sometimes differ from the holdings of the overall index.
XSD Holdings
| Company | % of Portfolio |
|---|---|
| Marvell Technology Inc. | 3.43% |
| Advanced Micro Devices Inc. | 3.35% |
| Broadcom Inc. | 3.22% |
| NVIDIA Corporation | 3.19% |
| Impinj Inc. | 3.02% |
| Micron Technology Inc. | 3.01% |
| Intel Corporation | 2.91% |
| QUALCOMM Incorporated | 2.90% |
| Lattice Semiconductor Corporation | 2.87% |
| MaxLinear Inc. | 2.84% |
| Total | 30.74% |
The XSD ETF holds approximately 30 holdings as of Jan 2024—the top 10 holdings of the ETF account for approximately 31% of the total assets. This means the other 20 holdings account for 69% of the portfolio. The largest holding was Marvel Technology Inc., which only accounts for 3.4% of the portfolio.
XSD has the most holdings of any other ETF on this list. In addition, it is also one of the most diversified ETFs on this list. The largest holdings account for 3.4%, and the top 10 holdings account for only 31%, whereas many other ETF top 10 holdings account for greater than 50% of the portfolio, such as SOXX and SMH.
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Invesco Semiconductors ETF (PSI)
| PSI | |
|---|---|
| Diversification | Dynamic Semiconductor Intellidex Index |
| Expense Ratio | 0.35% |
| SEC Yield | 0.13% |
| 1-Year (Returns) | 28.38% |
| 5-Year (Returns) | 25.12% |
| 10-Year (Returns) | 23.25% |
| Dividend Yield | 0.42% |
| Dividend Growth Rate 5Y (CAGR) | 10.17% |
The Invesco Semiconductors ETF, or PSI, is an exchange-traded fund that Invesco manages. The fund seeks to track the performance of the Dynamic Semiconductor Intellidex Index and is rebalanced and reconstituted quarterly.
The Dynamic Semiconductor Inellidex Index tracks the performance of the top 30 US stocks in the semiconductor industry. This index is different from other indexes on this list because it primarily includes companies involved in the manufacture of semiconductors. Other indexes often include companies that are connected to the semiconductor industry in other ways, such as design or distribution.
PSI is a great ETF choice if you want to target your investment to semiconductor manufacturers rather than any other companies in the semiconductor industry.
PSI Holdings
| Company | % of Portfolio |
|---|---|
| Advanced Micro Devices Inc | 6.08% |
| Broadcom Inc | 5.22% |
| NVIDIA Corp | 5.15% |
| QUALCOMM Inc | 5.10% |
| Lam Research Corp | 4.96% |
| Micron Technology Inc | 4.90% |
| Applied Materials Inc | 4.77% |
| Intel Corp | 4.74% |
| MKS Instruments Inc | 3.35% |
| Photronics Inc | 3.33% |
| Total | 47.60% |
The PSI ETF holds approximately 31 holdings as of Jan 2024—the top 10 holdings of the ETF account for approximately 48% of the total assets. This means the other 21 holdings account for 52% of the portfolio. The largest holding was Advanced Micro Devices inc which accounts for 6.08% of the portfolio.
One important note is that although both XSD and PSI are Invesco ETF they have very different portfolio holdings. With that said, XSD’s top 4-5 holdings are very similar to SMH and SOXX ETFs, but the overall portfolio differs from those and generates different returns.
First Trust Nasdaq Semiconductor ETF (FTXL)
| FTXL | |
|---|---|
| Diversification | Nasdaq US Smart Semiconductor |
| Expense Ratio | 0.60% |
| SEC Yield | 0.65% |
| 1-Year (Returns) | 35.42% |
| 5-Year (Returns) | 24.21% |
| 10-Year (Returns) | - |
| Dividend Yield | 0.63% |
| Dividend Growth Rate 5Y (CAGR) | 21.93% |
The First Trust Semiconductor ETF or FTXL is an exchange-traded fund managed by First Trust that tracks the performance of the Nasdaq US Smart Semiconductor index. The exchange-traded fund practices a full replication strategy to ensure that performance is 95% correlated with the index.
The Nasdaq US Smart Semiconductor index holds approximately 30-50 stocks depending on three key criteria. The index ranks companies in the semiconductor industry by trailing 12-month return on assets, trailing 12-month gross income, and average price appreciation. Based on these rankings, the fund removed the bottom 25% of eligible companies, and the remaining companies comprise the index. The weight of the remaining companies is weighted in the portfolio based on their trailing 12-month cash flow with an 8% max and 0.50% minimum.
The result is typically a fund with a wide range of companies, including large, mid, and small market capitalization companies.
FTXL Holdings
| Company | % of Portfolio |
|---|---|
| Intel Corporation | 9.43% |
| QUALCOMM Incorporated | 9.13% |
| Broadcom Inc. | 9.03% |
| Applied Materials, Inc. | 7.57% |
| Texas Instruments Incorporated | 7.11% |
| Advanced Micro Devices, Inc. | 5.67% |
| Micron Technology, Inc. | 4.31% |
| KLA Corporation | 4.20% |
| NVIDIA Corporation | 4.15% |
| Lam Research Corporation | 4.05% |
| Total | 64.65% |
The FTXL ETF holds approximately 32 holdings as of Jan 2024—the top 10 holdings of the ETF account for approximately 65% of the total assets. This means the other 22 holdings account for 35% of the portfolio. The largest holding was Intel Corporation which accounts for 9.5% of the portfolio.
One key distinction between FTXL and the other ETFs is that while they have similar companies in the top 10 holdings, the composition is one the most unique. This means that it holds Intel as its largest holding, although many companies in the sector hold it as the ninth or tenth largest holding. With that said, the portfolio is not as diversified as some of the other ETFs on the list, with only SMH having a higher concentration in the top 10 holdings.
Semiconductor ETF Performance Analysis
One of the most important metrics of any ETF is the returns they generate annually and cumulatively. Below, we are going to compare the performance of the ETFs on this list to have a better understanding of how they performed.
The table below shows you the cumulative returns performance of the semiconductor ETFs over 1-year, 3-year, 5-year, and 10-year time periods.
We can see that overall, the ETFs generate returns that are very similar to one another; the ETFs generally perform with 10% of one another. From the cumulative returns chart, we can see that, in general, over all time periods, SMH and SOXX have consistently been the top performers. Meanwhile, the performance between XSD, PSI, and FTXL varies depending on the time period.
Below, we are going to look at the performance of each ETF on an annual basis over the last ten years.
The chart below shows that there is more variability in the individual annual performance by ETF. There is no single ETF that consistently outperforms on an annual basis. With that said, for short-term investments of 1 year or less, it’s hard to choose the ETF that will have the best performance. This chart shows us that there are years of negative returns in the semiconductor industry. With 3 out of the last ten years generating negative returns.
Overall, as medium- or long-term investments, it is clear that SOXX and SMH generate higher returns than the other ETFs on this list.
Final Thoughts
We have presented the top-performing semiconductors on the market for 2024. While there are many things you should consider when selecting which ETF is best for you, this article should help make that decision easier.
Some key takeaways from this article are that if you are looking for an ETF with the lowest expense ratio, then SOXX is the best choice. On the other hand, if annual and cumulative returns are your priority, then SMH and SOXX have been the top two semiconductor ETFs. Both SMH and SOXX generated the highest annual returns in 2023 and have the highest cumulative return over a 3-year, 5-year, and 10-year investment period.
One key distinction between these two ETFs is their diversification. SOXX is more diversified and has more holdings. On the other hand, SMH is more top-concentrated, with the top 10 holdings accounting for 70% of the portfolio and the largest holding accounting for 22%.
Risks and Considerations
As with any investment, there are risks and considerations to keep in mind when investing in semiconductor ETFs. This section will discuss two key risks and considerations investors should know.
Market Volatility and Regulatory Changes
Market volatility is one of the main risks associated with investing in semiconductor ETFs. The semiconductor industry is highly cyclical, and changes in demand for semiconductors can significantly impact the performance of semiconductor ETFs. As we can see from the performance history chart above, the industry has had three years of negative annual returns over the last ten years. Over a single year, the annual returns may be negative; over the longer term, the semiconductor industry has shown growth.
Additionally, regulatory changes can also impact the performance of semiconductor ETFs. For example, changes in trade policies or regulations could impact the supply chain of semiconductor companies and lead to increased volatility in the market.
Supply Chain Challenges
Another risk associated with investing in semiconductor ETFs is supply chain challenges. The semiconductor industry is highly dependent on complex supply chains, and disruptions in these chains can impact semiconductor ETFs’ performance.
For example, natural disasters, geopolitical tensions, or other factors that impact the production or transportation of semiconductors could lead to supply chain disruptions that impact the performance of semiconductor ETFs.
To mitigate these risks, investors should carefully consider the composition of the semiconductor ETFs they are considering investing in. It is important to look at the underlying holdings of the ETF and assess the risks associated with those holdings.
Additionally, investors should consider diversifying their investments across multiple semiconductor ETFs to spread out their risk and reduce the impact of any one ETF on their overall portfolio.
FAQ
What are the top-performing semiconductor ETFs to consider in 2024?
Some of the top-performing semiconductor ETFs in 2024 include SMH, SOXX, XSD, PSI, and FTXL. The top-performing ETF in 2023 was SMH, with a total return of 54.67%, with SOXX following in a close second with a total return of 46.30%. Over longer investments, the performance of the ETFs is much closer. But SMH and SOXX over a 5-year cumulative return period generated 33.16% and 31.13%.
Which Vanguard fund focuses on semiconductor investments this year?
Vanguard does not offer an ETF that invests in the semiconductor industry. If you want to invest with Vanguard and in the semiconductor sector, you would need to invest in a technology-specific ETF that would give you some exposure to the semiconductor industry. One of Vanguard’s most popular technology ETFs is VGT or Vanguard Information Technology ETF.
Are there any new entrants in the semiconductor ETF market for 2024?
There are no new semiconductor ETFs that are being introduced in 2024. One of the newest ETFs in the semiconductor sector is FTXL, which was started in 2016 and is one of the best-performing semiconductor ETFs in the market.
How do iShares Semiconductor ETFs compare to their competitors in the current year?
iShares Semiconductor ETFs, such as SOXX, have been top performers in the semiconductor market for several years. In 2024, they are expected to continue to perform well, but investors should also consider other top-performing semiconductor ETFs, such as SMH, XSD, and FTXL.
What are the long-term prospects for the SMH ETF in 2024?
The VanEck Vectors Semiconductor ETF (SMH) has been a top-performing semiconductor ETF for several years and is expected to continue to perform well in 2024. With a strong focus on large-cap semiconductor companies, SMH is a good choice for investors looking for long-term growth in the semiconductor industry.
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Which semiconductor ETFs are listed on the NASDAQ and have shown significant growth?
Both the iShares PHLX Semiconductor ETF (SOXX) and the First Trust Nasdaq Semiconductor ETF (FTXL) are listed on the NASDAQ and have shown significant growth in recent years. SOXX has been a top performer in the semiconductor market, while FTXL focuses on small- and mid-cap semiconductor companies and has shown strong growth potential.
