After a slow start in 2024, the semiconductor market is bouncing back, driven by the ever-growing demand for microchips, particularly due to the rise of artificial intelligence (AI). As a result, the time looks ripe to invest in strong semiconductor ETFs VanEck Semiconductor ETF (SMH), Invesco Semiconductors ETF (PSI), and SPDR S&P Semiconductor ETF (XSD), which are poised to benefit from the industry’s expansion.

Generative AI, in particular, has sparked massive investment across the tech sector, creating a surge in the need for semiconductors. The Semiconductor Industry Association (SIA) recently reported that global semiconductor sales reached $57.80 billion in November, up 20.7% year over year and 1.6% from October’s $56.90 billion. It’s clear that demand for chips is growing, and with the rise of AI, that momentum will only accelerate.

According to Gartner, the global semiconductor revenue is forecasted to grow by 14% in 2025, reaching $717 billion. Meanwhile, the global semiconductor market is expected to reach $1.14 trillion by 2033, exhibiting a CAGR of 7.6%. Given the compelling growth drivers in the industry, semiconductor ETFs are an appealing option for those looking to capture a share of the tech growth wave.

With that in mind, let’s look at the fundamentals of the three Technologies Equities ETFs picks, beginning with the third choice.

ETF #3: Invesco Semiconductors ETF (PSI)

PSI invests in stocks of companies operating across information technology, semiconductors, and semiconductor equipment sectors, and it tracks the Dynamic Semiconductor Intellidex Index. Invesco Capital Management LLC manages this fund.

With $772.10 million in assets under management (AUM), its top holdings are Broadcom Inc. (AVGO) with a 6.50% weighting in the fund, Lam Research Corporation (LRCX) at 4.83% weight, followed by NVIDIA Corporation (NVDA), and QUALCOMM Incorporated (QCOM) with 4.77% and 4.72% weightings, respectively. The fund has a total of 31 holdings.

The ETF’s expense ratio is 0.56%, compared to the category average of 0.59%. PSI fund outflows were $2.96 million over the past month and $54.99 million over the past year.

PSI pays an annual dividend of $0.08, which translates to a 0.14% yield at the current price level. The fund’s dividend payouts have grown at a 5.6% CAGR over the past three years. Its four-year average yield is 0.32%.

Over the past year, PSI has gained 26.6% to close the last trading session at $59.55. The fund’s NAV was $59.59 as of January 13, 2025.

PSI’s POWR Ratings reflect its promising prospects. The ETF has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The fund has an A grade for Trade and a B for Buy & Hold and Peer. PSI is ranked #49 out of 119 stocks in the B-rated Technologies Equities ETFs group. Click here to access all the PSI ratings.

ETF #2: VanEck Semiconductor ETF (SMH)

Van Eck Associates Corporation manages SMH. The fund invests in growth and value stocks of companies that are operating across the information technology, semiconductors, and semiconductor equipment sectors. It seeks to track the performance of the MVIS US Listed Semiconductor 25 Index.

As of January 10, SMH had $23.97 billion in assets under management and an NAV of $247.11. Its expense ratio of 0.35% compares to the category average of 0.59%.

The fund’s top holdings include NVDA with a 19.56% weight, Taiwan Semiconductor Manufacturing Company Limited (TSM) with a 12.55% weight, AVGO with a 9.58% weight, and ASML Holding N.V. (ASML) with a 5.06% weight. It has a total of 26 holdings.

SMH’s trailing-12-month dividend of $1.07 yields 0.43% on the current price level, while its four-year average dividend yield is 0.65%. Its dividend payouts have grown at a 10.8% CAGR over the past three years.

SMH has gained 41.8% over the past year and 10.1% over the past nine months to close the last trading session at $244.64. Its fund inflows came in at $6.56 billion over the past year and $2.20 billion over the past six months.

SMH’s bright prospects are reflected in its POWR Ratings. The ETF has an overall B rating, equating to a Buy in our proprietary rating system.

It also has a B grade for Trade and Buy & Hold. It is ranked #43 out of 119 ETFs in the same B-rated group. Click here to access SMH’s Peer grade as well.

ETF #1: SPDR S&P Semiconductor ETF (XSD)

XSD seeks to invest in companies’ stocks operating across information technology, semiconductors and semiconductor equipment, and semiconductors sectors. It tracks the performance of the S&P Semiconductor Select Industry Index.

The fund has a total of 42 holdings. Its top holdings include AVGO with a 3.80% weighting, Allegro MicroSystems, Inc. (ALGM) at 3.27%, followed by Astera Labs, Inc. and Marvell Technology, Inc. (MRVL) with 3.23% and 3.22% weightings, respectively.

XSD has an expense ratio of 0.35%, lower than the category average of 0.59%. Over the past month, the fund’s net outflow came in at $19.12 million.

XSD pays an annual dividend of $0.49, translating to a 0.20% yield at the prevailing price level. The fund’s four-year average yield is 0.26%. Its dividend payouts have grown at a 28% CAGR over the past three years.

XSD has gained 16.2% over the past year to close the last trading session at $247.75. As of January 10, 2025, the fund had assets under management (AUM) of $1.38 billion and an NAV of $250.18.

It’s no surprise that XSD has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Peer and Trade and a B for Buy & Hold. XSD is ranked #16 in the same Technology Equities ETFs group. Get all XSD ratings here.

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SMH shares rose $1.86 (+0.76%) in premarket trading Tuesday. Year-to-date, SMH has gained 1.02%, versus a -0.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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