The semiconductor industry, known for its high volatility and cyclical nature, once again displayed its dramatic swings in October. Recent events have highlighted just how quickly fortunes can change in this high-profile sector.
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For example, shares of Taiwan Semiconductor Manufacturing Co. Ltd. (ticker: TSM) surged nearly 10% after the company reported a 54% increase in net profits for the third quarter and raised its revenue growth forecasts to an expected pace of 35%.
Conversely, shares of ASML Holding NV (ASML), a Dutch company that produces advanced lithography machines essential for creating intricate circuits on chips, plummeted by 16% after an accidental, less-than-stellar early earnings release due to a website glitch.
“ASML’s recent earnings report disappointed many investors,” explains Justin Zacks, vice-president of strategy and spokesperson at Moomoo Technologies Inc., a brokerage platform. “Struggles at Intel Corp. (INTC), one of its primary customers, and a slowdown in order bookings in part driven by changes in demand from China led the company to tweak its outlook for 2025.”
The company revised its 2025 revenue guidance down to between 30 billion and 35 billion euros, a significant reduction from earlier forecasts, with net confirmed orders for the quarter only reaching 2.6 billion euros — far below the consensus estimate of 5.6 billion euros.
“These two divergent earnings reports highlight the risk and potential volatility when investing in single stocks,” Zacks says. Therefore, if your goal is to gain long-term exposure to the overall success of the semiconductor sector rather than reacting to individual earnings reports, investing in a semiconductor exchange-traded fund, or ETF, may be a wiser choice.
“The potential benefits of investing in semiconductor ETFs include exposure to a high-growth sector with strong fundamentals, diversification across multiple companies in the industry and the potential for long-term capital appreciation,” says Sean August, CEO of August Wealth Management Group.
Here are seven of the best semiconductor ETFs to buy today:
| ETF | Expense ratio |
| VanEck Semiconductor ETF (SMH) | 0.35% |
| iShares Semiconductor ETF (SOXX) | 0.35% |
| Invesco PHLX Semiconductor ETF (SOXQ) | 0.19% |
| Invesco Semiconductors ETF (PSI) | 0.57% |
| SPDR S&P Semiconductor ETF (XSD) | 0.35% |
| VanEck Fabless Semiconductor ETF (SMHX) | 0.35% |
| Strive U.S. Semiconductor ETF (SHOC) | 0.40% |
VanEck Semiconductor ETF (SMH)
“When looking for semiconductor ETFs, investors should consider factors such as the expense ratio, the underlying index or benchmark, the fund’s holdings and diversification strategy, and the ETF’s historical performance,” August says. “It is also important to assess the fund’s liquidity and trading volume to ensure that it is easy to buy and sell.” An ETF like SMH can help new investors learn these mechanics.
SMH charges a 0.35% expense ratio to track the MVIS US Listed Semiconductor 25 Index. This benchmark holds the largest and most liquid U.S.-listed semiconductor companies, with Nvidia Corp. (NVDA) and Taiwan Semiconductor Manufacturing accounting for roughly 36% of its portfolio. It is the largest semiconductor ETF as well, with over $24.7 billion in assets under management (AUM).
iShares Semiconductor ETF (SOXX)
A competitor and possible tax-loss harvesting partner for SMH is SOXX. This ETF also provides exposure to U.S.-listed semiconductors, but via a different benchmark, the NYSE Semiconductor Index. It has 30 holdings and is less top-heavy than SMH, with Nvidia, Broadcom Inc. (AVGO), Advanced Micro Devices Inc. (AMD), Qualcomm Inc. (QCOM) and Texas Instruments Inc. (TXN) cumulatively representing about one-third of its holdings.
SOXX is smaller than SMH with $14.7 billion in AUM, but is still very well capitalized for an ETF. It’s also extremely liquid, with a low 0.02% 30-day median bid-ask spread. However, prospective investors must be comfortable with volatility, given this ETF’s high 1.6 three-year beta, a figure which measure’s a stock’s volatility in relation to the S&P 500. For enhanced exposure, SOXX also features an options chain with numerous expiry dates and strike prices.
Invesco PHLX Semiconductor ETF (SOXQ)
“While certain segments of the semiconductor market, like memory, may be facing near-term pressure due to oversupply concerns, the longer-term growth potential driven by advancements in artificial intelligence, autonomous driving and high-performance computing remains strong,” says Rene Reyna, head of thematic and specialty product ETF strategy at Invesco.
For semiconductor exposure, Invesco offers SOXQ at a 0.19% expense ratio, cheaper than both SOXX and SMH, which each charge 0.35%. SOXQ tracks the PHLX Semiconductor Sector Index, a benchmark of 30 large, U.S.-listed semiconductor companies. Top holdings are very similar to SOXX, with Nvidia, Broadcom, Advanced Micro Devices and Taiwan Semiconductor Manufacturing all making an appearance.
Invesco Semiconductors ETF (PSI)
“Having broad exposure to the semiconductor ecosystem via an ETF allows investors to capture these growth opportunities while helping navigate the cyclical nature of the industry,” Reyna says. Most semiconductor ETFs approach this in a straightforward way, weighting eligible companies by market capitalization. However, there are also semiconductor ETFs like PSI that use fundamental weighting.
This ETF tracks the Dynamic Semiconductor Intellidex Index. “PSI screens its 30 holdings for factors like price momentum, earnings momentum, quality, management action and value in an attempt to outperform,” Reyna says. However, investors should understand that there is no guarantee that PSI’s advanced methodology will help it beat the sector. PSI charges a 0.57% expense ratio.
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SPDR S&P Semiconductor ETF (XSD)
As noted, many semiconductor ETFs like SMH, SOXQ and SOXX are primarily weighted by market capitalization. As a result, the larger the stock, the more it influences the fund’s performance. An alternative strategy is equal weighting, where each company, regardless of size or characteristics, receives an identical allocation. To put this in play, consider XSD, which charges a 0.35% expense ratio.
XSD tracks the S&P Semiconductor Select Industry Index, which uses an equal-weight strategy. The main advantage of XSD’s approach is that it offers increased exposure to small- and mid-cap semiconductors. However, a potential drawback is its quarterly rebalancing schedule, which can limit the fund’s momentum, thereby not allowing winners to run as freely as they might in other strategies.
VanEck Fabless Semiconductor ETF (SMHX)
A semiconductor fabrication plant, or “fab,” is where companies create integrated chips. For instance, ASML holds a significant advantage in this area through its lithography technology, which is crucial for etching circuit patterns onto silicon wafers. However, owning and operating fabs can be a double-edged sword, as it requires massive capital investment and is highly susceptible to economic cycles.
In contrast, SMHX focuses on companies like Nvidia, Broadcom and Advanced Micro Devices, which operate on a fabless model. These companies design their semiconductor products but outsource the actual manufacturing to specialized fabrication plants. This approach allows them to concentrate on innovation and design while avoiding the heavy capital costs and cyclicality associated with fabs.
Strive U.S. Semiconductor ETF (SHOC)
If you’re looking to take a more active role in your investment choices, SHOC offers a unique opportunity. Managed by Strive Asset Management, a firm founded by Vivek Ramaswamy, SHOC tracks the Bloomberg US Listed Semiconductors Select Total Return Index and carries a modest 0.4% expense ratio. Top holdings include industry giants like Nvidia, ASML, Advanced Micro Devices and Broadcom.
What sets SHOC apart is its strong commitment to Milton Friedman’s principle of “shareholder primacy.” Unlike most ETFs, which typically take a passive approach to corporate governance, Strive actively exercises its voting rights in proxy shares and engages directly with the management and boards of the companies within SHOC’s portfolio. So far, the ETF has attracted about $80 million in AUM.
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7 Best Semiconductor ETFs to Buy in 2024 originally appeared on usnews.com
Update 10/23/24: This story was previously published at an earlier date and has been updated with new information.
