The world is holding its breath as President-elect Donald Trump threatens blanket import tariffs, but under the outgoing Biden administration, restrictions are already being placed on one of the most critical modern strategic resources: semiconductors.
Earlier this month, the U.S. Commerce Department’s Bureau of Industry and Security announced new restrictions targeting both chip manufacturing equipment and software. These measures escalate a series of sanctions aimed at curbing China’s access to advanced semiconductor technology.
Specifically, the restrictions target high-bandwidth memory (HBM) chips, which are critical for the data centers driving artificial intelligence development. Both U.S.-made and foreign-manufactured HBM chips are now prohibited from export to China.
In addition, 140 Chinese semiconductor companies were added to the Commerce Department’s “Entity List,” a commercial blacklist that effectively bans them from conducting business with U.S. companies.
According to various government officials, the restrictions and export controls were implemented as part of a coordinated effort to safeguard U.S. national security and inhibit China’s military modernization.
In response, China has ramped up imports in a bid to stockpile semiconductors before the sanctions take full effect. According to a report from the South China Morning Post, the Chinese General Administration of Customs reported a 14.8% year-over-year increase in chip imports.
“Currently, China is enhancing its domestic semiconductor production and AI industry to reduce dependence on foreign technologies and bolster economic resilience,” says Derek Yan, senior investment strategist at KraneShares.
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On the U.S. side, domestic semiconductor manufacturing continues to be bolstered by billions in subsidies. These funds are supporting homegrown companies like Texas Instruments Inc. (ticker: TXN) and encouraging foreign firms like Samsung Electronics Co. Ltd. (OTC: SSNLF) to establish production facilities on American soil.
This escalating regulatory and trade battle creates significant volatility for semiconductor investors. Depending on the scope and timing of new sanctions, the fortunes of individual semiconductor stocks can rise or fall rapidly.
To mitigate this risk, consider taking an industry-wide approach with a semiconductor exchange-traded fund (ETF). These funds provide diversified exposure, ensuring that no matter which company is in Washington’s crosshairs — or favor — you can still benefit from long-term secular demand.
“Semiconductor stocks may be well positioned for the future due to strong demand from AI and continuous advancements across other critical technologies,” says Arne Noack, regional investment head — Xtrackers, Americas — at DWS Group. “Additionally, ongoing constructive policy, such as the CHIPS and Science Act, may be supportive to domestic production and reduce dependency, creating a favorable environment for growth.”
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% |
| VanEck Fabless Semiconductor ETF (SMHX) | 0.35% |
| Invesco PHLX Semiconductor ETF (SOXQ) | 0.19% |
| SPDR S&P Semiconductor ETF (XSD) | 0.35% |
| Strive U.S. Semiconductor ETF (SHOC) | 0.4% |
| Columbia Semiconductor and Technology ETF (SEMI) | 0.75% |
VanEck Semiconductor ETF (SMH)
“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. For example, semiconductor ETF SMH has compounded at an annualized 25.7% over the last 10 years.
This ETF currently holds over $24 billion in assets under management. It tracks the MVIS US Listed Semiconductor 25 Index, which holds 25 of the largest, most liquid U.S. semiconductor stocks. To be eligible for inclusion, a company must generate at least 50% of its revenues from semiconductors. All holdings are capped at 20% maximum at each quarterly rebalance. SMH charges a 0.35% expense ratio.
iShares Semiconductor ETF (SOXX)
“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 alternative to SMH that checks all these boxes is SOXX.
This ETF tracks the 30 largest U.S. listed semiconductor stocks via the ICE Semiconductor Index. But unlike SMH, SOXX is less top heavy. Notable holdings currently include Nvidia Corp. (NVDA), Broadcom Inc. (AVGO), Advanced Micro Devices Inc. (AMD) and Qualcomm Inc. (QCOM). The ETF is very liquid with a 0.02% 30-day median bid-ask spread and has an options chain. It charges a 0.35% expense ratio.
VanEck Fabless Semiconductor ETF (SMHX)
Fabs, or fabrication facilities, are factories where semiconductors are physically manufactured. These facilities operate by producing chips based on designs provided by semiconductor companies, earning revenue through high-volume production contracts. While they offer significant profit potential, fabs are also exposed to risks like high capital costs, geopolitical tensions and supply chain disruptions.
For investors seeking to mitigate these risks, SMHX offers an alternative with a focus on asset-light semiconductor designers like Nvidia, Broadcom and Advanced Micro Devices. This can help semiconductor investors avoid the operational risks associated with fabs. SMHX charges the same 0.35% expense ratio as SMH. This ETF debuted in August 2024 and has attracted about $27 million in AUM.
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 AI, autonomous driving and high-performance computing remains strong,” says Rene Reyna, head of thematic and specialty product ETF strategy at Invesco. Invesco offers SOXQ at a 0.19% expense ratio.
This ETF tracks 30 large U.S. listed semiconductor companies via the PHLX Semiconductor Sector Index. “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. Overall, this ETF has a similar composition to SOXX, making it a potentially useful tax-loss harvesting partner.
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SPDR S&P Semiconductor ETF (XSD)
SMH, SOXX and SOXQ all use different indexes, but share a similar trait. To some extent, the benchmarks tracked by all three ETFs are market-capitalization weighted. This results in an overweight to larger semiconductor companies such as Nvidia, Advanced Micro Devices and Broadcom. For a focus on the up-and-coming players, consider using XSD, which tracks the S&P Semiconductor Select Industry Index.
Unlike the previous ETFs, XSD’s benchmark index is equally weighted. This means that at each quarterly rebalance, small, mid and large-cap stocks are assigned the same allocation. This mechanic introduces a natural “buy low, sell high” effect and can help reduce concentration risk. The ETF currently has just over $1.5 billion in assets under management and charges the same 0.35% expense ratio as SOXX and SMH.
Strive U.S. Semiconductor ETF (SHOC)
Co-founded by Vivek Ramaswamy, Strive Asset Management embraces Milton Friedman’s principle of “shareholder primacy,” the idea that a company’s primary responsibility is to maximize shareholder returns. Their semiconductor ETF, SHOC offers investors a way to align their investments with this philosophy. It currently has $78 million in AUM and charges a 0.4% expense ratio.
SHOC tracks the Bloomberg U.S. Listed Semiconductors Select Total Return Index. Strive uses its proxy voting power and board petitions to advocate for companies to prioritize financial performance over “non-pecuniary” factors, such as environmental, social and governance (ESG) considerations, which focus on ethical and sustainable practices rather than direct financial outcomes.
Columbia Semiconductor and Technology ETF (SEMI)
SEMI uses a unique “semi-transparent” ETF structure. Unlike traditional ETFs that publish their holdings daily, SEMI only discloses a “tracking basket,” which includes some actual holdings along with others that are highly correlated to facilitate trading. This structure comes with trade-offs. On the downside, it may result in less liquidity and reduced information for prospective investors.
However, it also shields the ETF’s actively managed strategy, preventing others from copying its moves or engaging in front-running. The ETF employs a growth-at-a-reasonable-price (GARP) approach to select 30-50 high-conviction semiconductor stocks. The goal of SEMI is to outperform the PHLX Semiconductor Sector Index, but so far it’s been an uphill challenge, largely due to a high 0.75% expense ratio.
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7 Best Semiconductor ETFs to Buy in 2025 originally appeared on usnews.com
Update 12/26/24: This story was previously published at an earlier date and has been updated with new information.
