They act as the so-called brains of numerous devices we heavily rely on today, ranging from smartphones and calculators to computers, cars and so much more and as technology improves and expands, semiconductors and chips continue being perpetually in demand as they power new devices.
The semiconductor industry has been consistently growing in spite of the COVID-19 pandemic-induced macroeconomic crisis. As a matter of fact, global semiconductor revenues have witnessed a notable spike in 2021, with worldwide sales topping $48.8 billion in October 2021 alone, an increase of 24% from the October 2020 total of $39.4 billion and 1.1% more than the September 2021 total of $48.3 billion, according to Semiconductor Industry Association (SIA). The industry’s revenue growth is expected to continue well into 2022 and while global fabs are expanding their production capacity worldwide, the chip supply crunch is anticipated to ease in the second half of this year.
Meanwhile, semiconductor ETFs have been big winners, increasingly gaining investors’ attention as supply and demand constraints continue to be a key factor driving their performance. With this in mind, those wishing to make the most of this digital revolution and invest in the few companies that are involved in semiconductor production and equipment, can do so through ETFs.
Featuring some top-notch industry leaders and boasting good growth potential, here is a roundup of some of the best-performing semiconductor ETFs.
Top Semiconductor ETFs
VanEck Semiconductor ETF (SMH)
ETF overview
A highly concentrated fund, the ETF tracks the overall performance of the 25 largest, U.S.-listed companies that produce semiconductors by replicating as closely as possible, before fees and expenses, the price and yield performance of the MVIS US Listed Semiconductor 25 Index. The fund typically invests at least 80% of its total assets in securities that make up the fund’s benchmark index, with these companies consisting of medium-cap, as well as foreign companies that are listed in the U.S. exchange. To be initially eligible, around 50% of the company’s revenues must be primarily in the production of semiconductors and semiconductor-related equipment, which means that the fund centres on pure play semiconductor stocks. At the same time, a capping scheme is applied to offer diversification, while more weight is given to large companies.
Here are the ETF’s top holdings:
| TICKER | COMPANY | WEIGHT % |
| ASML | ASML Holding NV | 9.95 |
| TSM | Taiwan Semiconductor Manufacturing Co Ltd | 9.92 |
| NVDA | Nvidia Corp | 9.28 |
| INTC | Intel Corp | 7.95 |
| QCOM | Qualcomm Inc | 7.77 |
Is the VanEck Semiconductor ETF a buy?
With $857.2 million in net assets and with an expense ratio of 0.35%, this is one of the largest ETFs of its kind, while it has posted 37.85% returns year-to-date. And with a relatively good split between massive, large and mid-cap sized companies, it offers a well-balanced risk/return profile. Meanwhile, the fund’s MSCI ESG Fund Rating is an AAA, based on a score of 9.17 out of 10, which is an excellent rating. As a result, the ETF is ideal as a long-term, core holding, particularly for buy-and-hold investors looking for specific exposure in this technology sector.
To add the VanEck Semiconductor ETF (SMH) to your portfolio, click here.
Invesco Dynamic Semiconductor (PSI)
ETF overview
A passively-managed fund, the Invesco Dynamic Semiconductors ETF tracks the Dynamic Semiconductor Intellidex Index, while it invests at least 90% of its total assets in common stocks that make up this index. The index itself is made up of stocks from 30 U.S. semiconductor companies which are mainly engaged in the manufacture of semiconductors, with these being selected based on a number of investment merit criteria, mainly their price and earnings momentum, value, quality and management action. As a result, the ETF tends to tilt towards companies that boast attractive momentum factors, favourable valuations and healthy balance sheets, while it avoids taking a simple cap-weighting approach like most ETFs do.
The ETF’s top five holdings are as follows:
| TICKER | COMPANY | WEIGHT % |
| AVGO | Broadcom Inc | 5.89% |
| AMAT | Applied Materials Inc | 5.22% |
| INTC | Intel Corp | 5.18% |
| QCOM | Qualcomm Inc | 5.02% |
| TXN | Texas Instruments Inc | 4.82% |
Is the Invesco Dynamic Semiconductor ETF a buy?
By using a proprietary, quantitative methodology that focuses on risk factors, style classification and stock valuation, the ETF centres on smaller growth companies due to its tier-weighting scheme so it reduces concentration in mega-caps. At the same time, it evenly weights the group of companies across size. Meanwhile, the Invesco Dynamic ETF has returned 46.7%, while according to Invesco, a hypothetical $10,000 investment made on December 31, 2011 would have turned into a $113,971 on November 30, 2021.
Interest to invest? Click here to buy the Invesco Dynamic Semiconductor ETF (PSI).
iShares Semiconductor ETF (SOXX)
ETF overview
Another passively-managed ETF, the iShares Semiconductor ETF provides exposure to companies that design, manufacture and distribute semiconductors, while it offers targeted access to U.S.-listed stocks. More specifically, this exposure consists of semiconductor companies that manufacture materials with semiconductors that are used in electronic applications or in LED and OLED technology, while it also includes providers of services or equipment associated with semiconductors. By using a market-cap-weighting with a capping methodology, the ETF selects companies that must meet both investability and liquidity requirements, as well as a minimum market cap of $100 million.
Among its top holdings, investor will find the following big-ticket firms:
| TICKER | COMPANY | WEIGHT % |
| AVGO | Broadcom Inc | 9.18 |
| QCOM | Qualcomm Inc | 8.16 |
| NVDA | Nvidia Corp | 6.68 |
| INTC | Intel Corp | 6.21 |
| AMD | Advanced Micro Devices Inc | 4.87 |
iShares Semiconductor ETF a buy?
Bearing in mind that the fund dedicates most of its assets to medium and large-cap companies, there may be an element of volatility to the ETF than traditional large-cap funds, however, this also offers opportunities for growth. Nonetheless, the iShares Semiconductor ETF invests in some well-known names like Nvidia (NVDA), AMD (AMD) and others that have both an excellent reputation in the industry and strong financials. As for its MSCI ESG Fund Rating, this currently stands at an AAA based on a score of 8.40 out of 10, so the companies the ETF covers show a strong or improving management of financially relevant environmental, social and governance issues, while they are expected to be more resilient to disruptions arising from such events.
Buy the iShares Semiconductor ETF (SOXX) through Moneybase Invest.
SPDR S&P Semiconductor ETF (XSD)
ETF overview
The SPDR S&P Semiconductor ETF tracks the popular S&P Semiconductor Select Industry Index and aims to provide investment results that correspond to the index’s total return performance. The index itself represents the semiconductors segment of the S&P Total Market Index, which is designed to track the broad U.S. equity market and comprises the semiconductors sub-industry. The ETF centres on U.S. stocks entirely, which means that it offers a concentrated exposure to the U.S. semiconductor industry, however, it dedicates the majority of its assets to medium and small-cap funds, which are equally weighted. In this manner, investors can take strategic position at a more targeted level than other, traditional sector-based investing.
The ETF’s top five holdings consist of the following companies:
| TICKER | COMPANY | WEIGHT % |
| MU | Micron Technology Inc | 3.03 |
| INTC | Intel Corporation | 2.89 |
| SGH | SMART Global Holdings Inc | 2.84 |
| OLED | Universal Display Corporation | 2.83 |
| ON | ON Semiconductor Corporation | 2.79 |
Is the SPDR S&P Semiconductor ETF a buy?
As mentioned above, the SPDR S&P Semiconductor ETF consists of medium and small-cap companies. Although this could mean that such firms tend to be more volatile when compared to larger companies, as is the case with the iShares Semiconductor ETF above, the SPDR S&P Semiconductor provides strong growth opportunities for those confident in the U.S. semiconductor industry. And with 40 holdings, it offers a good amount of diversification. As for its performance, the fund is up roughly 34.31% over the past 12 months as of January 6, 2022.
To add the SPDR S&P Semiconductor ETF (XSD), click here.
First Trust Nasdaq Semiconductor ETF (FTXL)
ETF overview
The investment objective of the First Trust Nasdaq Semiconductor ETF is to seek investment results that correspond to the price and yield, before fees and expenses, of the Nasdaq U.S. Smart Semiconductor Index, by replicating the holdings and weightings of this index so as to generate 95% performance results matched to that of the index. The ETF invests at least 90% of its net assets in the index’s stocks and depository receipts, with companies selected based on their liquidity, while they are weighted based on the scoring of three important investing factors, mainly value, growth and their volatility.
Below is a list of the ETF’s top holdings:
| TICKER | COMPANY | WEIGHT % |
| AVGO | Broadcom Inc | 9.02 |
| INTC | Intel Corporation | 8.60 |
| QCOM | Qualcomm Incorporated | 8.07 |
| TXN | Texas Instruments Incorporated | 7.61 |
| SYNA | Synaptics Incorporated | 7.18 |
Is the First Trust Nasdaq Semiconductor ETF a buy?
Liquidity is often a key factor when selecting companies to invest in, but what sets the First Trust Nasdaq Semiconductor ETF apart is the fact that it uses a liquidity selection that involves including the 30 most liquid semiconductor stocks in the U.S. as determined by the average daily traded volume over three months. And with an AA MSCI ESG Fund Rating based on a score of 8 out of 10, the fund consists of companies that are resilient to long-term risks and opportunities arising from environmental, social and governance factors. On the other hand, when it comes to performance, according to the ETF’s prospectus, a hypothetical $10,000 investment made on September 20, 2016 would have grown into a $41,066.51 on January 6, 2022.
Click here to buy the First Trust Nasdaq Semiconductor ETF (FTXL).
How to invest in clean energy ETFs with Moneybase Invest
Ready to invest in these top semiconductor ETFs? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the ETF name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The ETF has been added to your portfolio.
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Want to find out more about ETFs, how they work and what the benefits of investing in them are? Have a look at this comprehensive guide on ETFs. Are you interested in other thematic ETFs? Here are top five AI (artificial intelligence) ETFs and some top Clean Energy ETFs. On the other hand, if you would like to give your income a much-needed boost, here are some top players in the dividend ETF space you may want to consider.
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