Semiconductors are the foundation of modern technology. These tiny chips power everything from smartphones to supercomputers, and as AI demand grows, the semiconductor industry is experiencing what analysts in the investing community call a once-in-a-generation supercycle.
For investors looking to capitalize on this growth without picking individual stocks, sector ETFs focused on semiconductors provide a powerful solution. These funds give investors exposure to dozens of companies across the semiconductor value chain.
Bank of America projects the global semiconductor market will hit $1 trillion by 2026, representing 30% year-over-year growth.1 IDC forecasts worldwide semiconductor revenue will reach $800 billion in 2025, growing 17.6% year-over-year.2
These ETFs have shown the potential to produce significant returns, but they come with trade-offs.
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Pros and Cons
Investing in sector ETFs allows you to target sectors you believe can deliver higher returns than the stock market overall. Unlike other ETFs that focus on value or dividends, these ETFs prioritize companies with strong earnings potential.
Of course, returns won’t match picking the right individual stocks. If you buy stock in the right company at the right time, you could see incredible gains. Nvidia has grown over 2,700% over the past five years. A $10,000 investment would now be worth almost $300,000.
The odds of putting significant money into the right company and never making emotional decisions is rare and comes with much more risk. Sector ETFs provide investors with access to many companies all within one purchase, providing greater diversification and reduced downside risk.
The average expense ratio for actively managed funds can exceed 1%, while these ETFs typically cost between 0.19% and 0.60%. That’s still cheaper than paying financial advisors or stock advisor services.
However, ETFs like this tend to have higher volatility. While they may deliver market crushing outperformance compared to benchmarks in strong years, they can also experience significant drawdowns. You also face concentration risk – sectors with growth potential may deliver significant returns over 5-10 years, but market dynamics can change drastically over time.
Past performance doesn’t guarantee future results, but historical performance data can help you evaluate these funds.
Let’s look at the following options that represent some of the top growth ETFs in the semiconductor sector.
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1. iShares Semiconductor ETF (SOXX)
This list is in no particular order, but to start, the iShares Semiconductor ETF tracks the NYSE Semiconductor Index providing investors exposure to U.S. listed companies that design, manufacture, and distribute semiconductors.
The fund has an expense ratio of 0.34%, automatically deducted as you own the fund over time.3
Many of these ETFs focused on technology have higher expense ratios than traditional index funds like the S&P 500, but unless you want to actively manage individual companies in the semiconductor industry, these funds offer a solid choice.
The fund has approximately 30 companies, with the top ten containing roughly 61% weight. Some of the top ones consist of Nvidia with roughly 10% weight toward the entire fund, then Broadcom at 9%, AMD at 8%. Also keep an eye on Taiwan Semiconductor, which is listed on the NYSE but based out of Taiwan. It’s one of the largest semiconductor companies in the world, but inside SOXX it only has a 4.29% weight.
SOXX is one of the more popular growth etfs in this sector with total assets of roughly $18.3 billion under management. The fund has a dividend yield that has averaged 0.55% over the past 12 months and pays out quarterly.
There’s only an 11% overlap with the S&P 500. The historical performance shows the fund has grown 40.71% over the past year, averaged 32.95% annually over 3 years, 20.77% over 5 years, and 26.83% over 10 years. Since inception in 2001, it has averaged an 11.87% annual return.
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2. Invesco PHLX Semiconductor ETF (SOXQ)
The investing community built around growth ETFs often highlights this fund as one of the best low-cost options. This fund tracks the PHLX Semiconductor Sector Index designed to measure 30 of the largest U.S. listed semiconductor companies.
Top holdings include Nvidia at 14.5%, Broadcom at 11%, and Taiwan Semiconductor at 4.57%. The top ten holdings cover 63.40% of the fund.
Don’t overlook the underlying structure on how each fund gives weight to holdings. Some growth etfs have 3% weight to Nvidia, while another has 23% weight. This allocation difference can dramatically impact your returns.
The fund has a lower expense ratio of 0.19%, making it one of the top etfs from a cost perspective. With only $0.5 billion in assets, it isn’t quite as popular as larger funds. It offers a 0.66% dividend yield paying quarterly. With 11% overlapping the S&P 500, historical performance shows it achieved a 54.98% return over the past year and averaged 13.95% over the past 3 years.4
This fund is relatively new, created in June 2020, so past performance data doesn’t go back further. If you like this structure and lower average expense ratio compared to other options, it could deliver solid long term returns.
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3. SPDR S&P Semiconductor ETF (XSD)
Unlike other ETFs that weight by market cap, this fund uses a modified equal-weight approach, providing broader exposure across large, mid, and small cap stocks.
The fund has 40 holdings with notably lower concentration. Nvidia only carries 3.38% weight, Intel has 3.63%, and Taiwan Semiconductor isn’t even included.
If you combine the top ten holdings, they make up roughly 36% of the entire fund, the lowest concentration of all the options. This equal-weight approach distinguishes it from other types of etfs that concentrate heavily in mega-cap leaders.
The fund rebalances quarterly to maintain these target weights.
The fund has roughly $1.4 billion in total assets, a 0.23% dividend yield paying out quarterly, and only 7% overlap with the S&P 500. The fund has a 0.35% expense ratio and historical performance shows growth of 35.6% over the past year. It has achieved a 1.57% average annual return over the past 3 years, then 19.98% over the past 5 years, and 20.97% over the past 10 years. Since it was created in 2006, it has averaged a 12.82% annual return.5
For investors who want to avoid heavy concentration in a few companies, this represents one of the best semiconductor ETFs to offer broad exposure across the semiconductor value chain.
If you are considering investing in ETFs and are new in this area, you can find more information in our article on how to invest in ETFs for beginners.
4. Invesco Dynamic Semiconductors ETF (PSI)
Starting with the downside – this fund has an expense ratio of 0.56%, which is higher than the average expense ratio across these growth etfs. It tracks the Dynamic Semiconductor Intellidex Index which evaluates companies based on price momentum, earnings momentum, quality, management action, and value.
This quantitative approach represents what many in the investing community favor for potentially generating market crushing outperformance.
PSI consists of 30 U.S. semiconductor companies with relatively balanced weighting. Nvidia has 5.58% weight, Broadcom is 5.5%, with the top ten holdings comprising roughly 50% of the fund.
PSI has $0.7 billion in cumulative assets, a 0.18% dividend yield paying quarterly, and 9% overlap with the S&P 500. Historical performance shows it achieved a 42.92% return over the past year, averaged 6.71% over 3 years, 22.05% over 5 years, and 22.25% over 10 years. Since inception in 2005, it grew 13.66%.6
While services like stock advisor focus on individual stock picks, growth ETFs like PSI provide access to multiple companies selected through quantitative factors. This can deliver strong returns without requiring you to buy stock in individual companies.
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5. First Trust Nasdaq Semiconductor ETF (FTXL)
This fund tracks the Nasdaq Smart U.S. Semiconductor Index and has a high expense ratio of 0.60%, making it one of the more expensive growth etfs in this category.
Companies in the index are ranked based on three factors:
- Trailing 12-month return on assets
- Trailing 12-month gross income
- Momentum across multiple time periods.
The fund keeps between 30-50 stocks, currently 31. Top holdings include Nvidia at 9.7%, Intel at 9.3%, and Broadcom at 8.8%, with the top ten comprising 63% of the fund.
Note: This fund also doesn’t include Taiwan Semiconductor, which may limit exposure to one of the industry’s largest manufacturers.
The fund has $1.5 billion in assets under management, a 0.5% dividend yield that pays out quarterly, and an 11% overlap with the S&P 500. Historical performance shows it has achieved a 40.85% return over the past year and has averaged 8.68% over the past 3 years, 19.58% over the past 5 years. Since it was created in 2016, that return is 20.84%.7
For growth etfs focusing on fundamentals like return on assets and momentum, FTXL represents a quantitative approach that differs from simple market-cap weighting.
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6. VanEck Semiconductor ETF (SMH)
This fund tracks the MVIS U.S. Listed Semiconductor 25 Index, focusing on the most liquid companies in the industry based on market cap and trading volume.
The fund limits individual company exposure to 20% and reviews holdings semi-annually in March and September with quarterly rebalancing.
SMH has a 0.35% expense ratio and $35.6 billion in total assets, which is among the largest of all the semiconductor ETFs mentioned in this article.8
SMH seeks to track the most liquid companies in the industry based on market cap and trading volume, favoring the largest companies, and includes both domestic and U.S. listed foreign companies for enhanced industry representation.
The fund has 26 companies where Nvidia holds the maximum 20% weight. Taiwan Semiconductor comes in at 10.62%, Broadcom at 8.17%, with the top ten holdings covering roughly 75.7% of the entire fund.
If you’re looking for maximum exposure to companies leading the industry, SMH is the way to go. Nvidia and Taiwan Semiconductor are the two largest in the industry and may continue to dominate over the coming years.
The fund has a 0.4% dividend yield paying annually with 12% S&P 500 overlap. Historical performance shows it has delivered monster returns that blow every other fund out of the room. Over the past year, it grew 49.16%. Over 3 years, it averaged 53.21%, over 5 years was 27.71%, and over 10 years averaged 30.95%. Since 2011, it has averaged a 26.87% annual return.
With total assets exceeding $35 billion, SMH represents one of the most liquid and established growth ETFs in the semiconductor sector, offering investors exposure to the industry’s dominant players.
If you want more on growth ETFs, check out our detailed breakdown on the best options.
SMH is our top pick at InvestLane due to its credibility, dominant industry exposure, and consistently strong historical performance.
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Your Next Steps
After analyzing each option, the top factors are expense ratio, historical performance, and weighting strategy. These are the following options most investors consider when choosing among the best growth ETFs in the semiconductors sector.
SOXQ is lowest at 0.19%, while FTXL and PSI are highest at 0.60% and 0.56%. SMH, XSD, and SOXX fall in the middle around 0.35%. The average expense ratio across these funds is approximately 0.40%.
Consider how much exposure you want to the largest companies and whether you want Taiwan Semiconductor included, and how much if so.
If you want equal diversification without Taiwan Semiconductor, consider XSD, PSI, or FTXL. For limited Taiwan exposure with solid diversification, look at SOXX or SOXQ. For maximum exposure to industry leaders, SMH is your best bet.
Note: Some investors ask about leveraged ETFs or inverse ETFs for semiconductors. Leveraged ETFs amplify returns through derivatives but carry much higher risk. Inverse ETFs profit when the sector declines. For most investors, the standard semiconductor ETFs listed above make the most sense.
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For many, you may want to narrow it down between SMH and SOXX. SMH has 31% combined weight to Nvidia and Taiwan Semiconductor, while SOXX has only 14%. I like SMH because I believe the top companies will continue to dominate, and this strategy has shown the potential to produce great returns over the coming years.
Remember, these growth ETFs are much more volatile than a total stock market fund. Ideally, plan on holding for at least 10 years. While short term returns can be impressive, the real value comes from long term returns that compound over decades.
Rather than trying to buy stock in individual semiconductor companies, these semiconductor ETFs provide great diversification while maintaining significant upside potential.
These index funds reduce single-stock risk. A small portion of sector funds you believe in most could be worth considering, especially when comparing growth ETFs to other broad market ETFs focused on value or dividends.
Remember that semiconductors benefit from powerful long term trends. AI algorithms require vast data processing, and semiconductors provide the speed and power needed. This suggests these best growth ETFs could deliver market crushing outperformance compared to broader indexes over the coming years.
The World Semiconductor Trade Statistics projects the market will grow by more than 25% year-over-year in 2026, reaching approximately $975 billion.
Check out our comparison of the best brokerage accounts if you’re ready to start investing. Many investors in the investing community built their portfolios gradually, starting with small positions in growth ETFs before increasing allocation over time.
Do your own research and make financial decisions based on what’s best for your situation.
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