In August, the U.S. government unofficially created a new breed of government-sponsored enterprise. Toward the end of that month, the Trump administration announced an $8.9 billion investment in Intel Corp. (ticker: INTC) common stock.
The funding was unconventional. It was financed with $5.7 billion in grants already awarded but not yet disbursed under the CHIPS and Science Act, plus $3.2 billion from the Secure Enclave program. This marked a notable departure from past policy, where grants and subsidies supported projects indirectly rather than the government taking direct equity stakes in public companies.
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However, the Trump administration wasn’t the only one making headlines. Shortly after, competitor Nvidia Corp. (NVDA) announced a $5 billion investment in Intel stock. The two companies will be co-developing multiple generations of central processing units (CPUs) and graphics processing units (GPUs) for data centers, integrating Intel’s x86 platform with Nvidia’s artificial intelligence (AI) capabilities.
At first glance, these developments may seem surprising, but they align with previously stated government priorities.
In February 2024, the “Critical and Emerging Technologies List Update” was released by the Fast Track Action Subcommittee on Critical and Emerging Technologies of the National Science and Technology Council. The report identified 18 critical technologies, including semiconductors.
For investors, geopolitical competition in the 21st century is therefore less about traditional strategic resources like oil and aluminum, and more about who can design and manufacture the cutting-edge chips that power modern economies and militaries.
Control is the key word, whether that’s governments now taking direct stakes in key companies or reshoring production to reduce reliance on overseas supply chains.
“Geopolitical tensions and tariffs have made semiconductor supply chains more complicated, driving companies toward diversifying and localizing manufacturing,” says Nick Frasse, product manager at asset manager VanEck.
While semiconductor valuations have already surged on AI capital expenditures from tech firms, these recent moves possibly point to a multiyear megacycle, fueled not only by private-sector demand but also by direct public investment, strategic partnerships and exponentially scaling tech advancements.
“Semiconductors continue to be a cornerstone for innovation, especially as AI models grow more powerful,” Frasse explains. “We’re closely watching compute and scaling laws — the trend of continuously increasing processing power — which strongly supports sustained semiconductor demand.”
Here are seven of the best semiconductor exchange-traded funds (ETFs) to buy today:
| ETF | Expense ratio |
| VanEck Semiconductor ETF (SMH) | 0.35% |
| iShares Semiconductor ETF (SOXX) | 0.34% |
| Invesco PHLX Semiconductor ETF (SOXQ) | 0.19% |
| VanEck Fabless Semiconductor ETF (SMHX) | 0.35% |
| SPDR S&P Semiconductor ETF (XSD) | 0.35% |
| Direxion Daily Semiconductor Bull 3X Shares (SOXL) | 0.75% |
| Direxion Daily Semiconductor Bear 3X Shares (SOXS) | 0.97% |
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. SMH is the poster child for this outperformance, having returned an annualized 29.3% over the past decade.
This ETF tracks the MVIS US Listed Semiconductor 25 Index, which emphasizes market capitalization and liquidity for inclusion. Notably, Nvidia’s continued outperformance has resulted in the company now holding a 19% weight as SMH’s top holding. The next largest, Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), is only half as dominant, with a 9.7% weight. 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.” The best semiconductor ETFs like SOXX possess all these traits.
SOXX tracks the NYSE Semiconductor Index, a benchmark of 30 U.S.-listed semiconductor companies weighted by market cap with some modifications and limits to make it less top heavy. It trades with a low 0.01% 30-day bid-ask spread and about 7 million shares a day, indicating very good liquidity. SOXX also charges a 0.34% expense ratio, which is fairly standard for this category.
Invesco PHLX Semiconductor ETF (SOXQ)
“While certain segments of the semiconductor market, like memory, may be facing 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. SOXQ is the firm’s answer to SMH and SOXQ.
The fund tracks the well-known PHLX Semiconductor Sector Index, a market-cap weighted benchmark of 30 U.S.-listed semiconductor stocks. What makes SOXQ stand out is its cost. With a 0.19% expense ratio, a $10,000 investment results in an annual fee drag of just $19, compared to $34 or $35 for either SOXX or SMH. Because exposures are so similar, cost-conscious investors may prefer SOXQ.
VanEck Fabless Semiconductor ETF (SMHX)
“The semiconductor industry continues to evolve rapidly, driven by fabless companies that prioritize chip design and innovation while outsourcing production,” Frasse explains. “This model allows firms like Nvidia to invest heavily in research and development, keeping (capital expenditure) low and maintaining agility in responding to market shifts.” Investors can own fabless semiconductor stocks via SMHX.
Choosing SMHX over a broader fund like SMH helps mitigate geopolitical risk. The world’s largest semiconductor foundry is based in Taiwan, a region marked by ongoing geopolitical tensions and disputed sovereignty. By focusing on fabless companies that outsource manufacturing, SMHX reduces direct exposure to this risk. SMHX charges the same 0.35% expense ratio as SMH.
[Read: 6 of the Best AI ETFs to Buy for 2025]
SPDR S&P Semiconductor ETF (XSD)
Market-cap weighting assigns larger allocations to bigger companies, which for SMH results in one stock, such as Nvidia, accounting for nearly a fifth of the ETF. SOXX and SOXQ apply caps to limit exposure, but even there, a single stock can still make up around 10% of assets. For investors concerned about concentration risk, XSD offers an alternative by tracking the S&P Semiconductor Select Industry Index.
This index takes 40 semiconductor companies from the S&P Total Market Index and equally weights them at each quarterly rebalance. That means small- and mid-cap semiconductor stocks receive the same weighting as the largest players. As a result, the fund’s top holdings are simply those that have outperformed since the last rebalance. XSD charges a 0.35% expense ratio.
Direxion Daily Semiconductor Bull 3X Shares (SOXL)
“Semiconductors are the engine powering the AI revolution and the modern global economy,” says Mo Sparks, chief product officer at Direxion. “Be it through trillion-dollar market caps, earnings surprises and misses, tariffs, or broader geopolitical events, today’s traders have plenty of catalysts and volatility to guide their daily conviction.” For traders bullish on semiconductor stocks, Direxion offers SOXL.
This ETF uses swaps to deliver a price return three times that of the NYSE Semiconductor Index. “Belief that AI and semiconductors will continue to drive economic expansion, paired with recent earnings that spotlighted continued opportunity and gigantic capex spending from technology companies, is likely all the conviction a bullish trader needs,” Sparks says. SOXL charges a 0.75% expense ratio.
Direxion Daily Semiconductor Bear 3x Shares (SOXS)
Semiconductor stocks trade at elevated valuations, making them a target for bearish traders anticipating a reversion to the mean. Traditional ways to bet against the sector include buying put options or short selling. Both approaches come with complications. For puts, time decay and changes in implied volatility can erode gains. For short selling, margin calls can arise if the stock price moves higher.
An alternative is buying shares of SOXS, the inverse counterpart to SOXL. The fund seeks to deliver three times the inverse of the daily return of the NYSE Semiconductor Index. Unlike shorting, the maximum loss is limited to the number of shares you own, and unlike puts, SOXS offers a leveraged directional bet without the need to account for option Greeks. That said, this vehicle carries its own risks and is not for beginners. The ETF charges a 0.97% expense ratio.
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7 Best Semiconductor ETFs to Buy in 2025 originally appeared on usnews.com
Update 09/30/25: This story was published at an earlier date and has been updated with new information.
