Semiconductors power more devices and technology processes every day, finding uses in mobile phones, cars, military weapons, smart technology, and much more. Exchange-traded funds (ETFs) can provide investors with broad exposure to the semiconductor industry. 4 ETFs currently track semiconductor stocks, excluding leveraged and inverse funds and those with under $50 million in assets under management (AUM). Some of the best known companies in the semiconductor industry include Micron Technology, Inc. (MU) and Advanced Micro Devices, Inc. (AMD). ETFs can help reduce the risk associated with individual stocks by providing access to a larger basket of companies. As measured by the benchmark S&P 500 Semiconductors Sub-Industry Index, the semiconductors industry has far outperformed the overall market in the past year. The Index has 1-year trailing total returns of 43.4% as compared with 18.2% for the S&P 500.
- The semiconductor industry dramatically outperformed the broader market in the past year.
- The top ETFs based on 1-year trailing total returns are SMH, SOXX, and PSI.
- The top holdings of these funds are Taiwan Semiconductor Manufacturing Co. Ltd., Qualcomm Inc., and Advanced Micro Devices Inc., respectively.
The best semiconductor ETF for Q4 2020 is the VanEck Vectors Semiconductor ETF (SMH). Below, we'll examine the top 3 best semiconductor ETFs as measured by 1-year trailing total returns. All figures in this story are as of August 20, 2020.
VanEck Vectors Semiconductor ETF (SMH)
- 1-Year Trailing Total Returns: 50.3%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 1.24%
- 3-Month Average Daily Volume: 3,393,689
- Assets Under Management: $2.6 billion
- Inception Date: December 20, 2011
- Issuing Company: VanEck
SMH uses the MVIS US Listed Semiconductor 25 Index as a benchmark. This index focuses on many of the largest semiconductor companies based in developed markets and listed on U.S. exchanges. The top holdings for SMH include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), the world's largest semiconductor foundry; NVIDIA Corp. (NVDA), a graphics processing unit and chip maker; and Intel Corp. (INTC), a semiconductor and cloud computing company.
iShares PHLX Semiconductor ETF (SOXX)
- 1-Year Trailing Total Returns: 46.2%
- Expense Ratio: 0.46%
- Annual Dividend Yield: 1.03%
- 3-Month Average Daily Volume: 752,783
- Assets Under Management: $3.5 billion
- Inception Date: July 10, 2001
- Issuing Company: iShares
This ETF ensures relatively even weighting among the roughly 125 stocks in its portfolio by capping its top holdings at around 8% of the total portfolio. This means that SOXX tends to look for foreign as well as U.S. firms, and that it balances both larger and smaller companies as well. Currently, the top holdings for SOXX are Qualcomm Inc. (QCOM), a wireless services, semiconductor, and software company; NVIDIA; and Texas Instruments, Inc. (TXN), a semiconductor and integrated circuit manufacturer.
Invesco Dynamic Semiconductors ETF (PSI)
- 1-Year Trailing Total Returns: 41.8%
- Expense Ratio: 0.58%
- Annual Dividend Yield: 0.40%
- 3-Month Average Daily Volume: 31,448
- Assets Under Management: $292.5 million
- Inception Date: June 23, 2005
- Issuing Company: Invesco
PSI is a multi-cap fund that targets growth semiconductor stocks. The fund tracks the Dynamic Semiconductors Intellidex Index and holds primarily small- and medium-cap U.S.-based stocks. The ETF's top holdings are Advanced Micro Devices, NVIDIA, and Qualcomm.