SMH: 3 Essential Semiconductor ETFs for Tech-Savvy Investors

The semiconductor industry lies at the heart of technological innovation, powering devices, and infrastructure for AI, 5G, IoT, and electric vehicles. Semiconductor ETFs offer diversified exposure in this booming sector while mitigating individual stock risks.

Below, I have highlighted three semiconductor ETFs: First Trust Nasdaq Semiconductor ETF (FTXL), iShares Semiconductor ETF (SOXX), and VanEck Semiconductor ETF (SMH).

Exchange-traded funds (ETFs) offer a strategic way to invest, providing a diversified portfolio that reduces risk while capturing broad market opportunities. ETFs allow investors to benefit from the collective growth of multiple companies in the tech sector.

With rising demand, new industry investments are set to increase chip production; the United States is forecasted to secure the largest share of new private investments in semiconductor manufacturing.

Thanks to the CHIPS and Science Act, as of August 2024, companies in the semiconductor ecosystem have announced more than 90 new manufacturing projects amounting to $450 billion across 28 states. Moreover, these new projects are set to create 58,000 new high-quality jobs in the semiconductor industry alone.

However, the Semiconductor Industry Association (SIA) reported global sales of $166 billion during the third quarter of 2024, up 23.2% year-over-year. Statista reports support this positive sentiment, predicting the global semiconductor market to reach $980.80 billion by 2029, growing at a CAGR of 10.1%.

Semiconductor companies have posted impressive financials, reflecting their integral role in modern technology, providing investors exposure to this lucrative trend while spreading risk across multiple players.

With that in mind, let’s look at the fundamentals of the above-mentioned three Technology Equities ETFs, beginning with number 3.

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ETF #3: First Trust Nasdaq Semiconductor ETF (FTXL)

FTXL seeks to track the performance of the Nasdaq US Smart Semiconductor Index. Managed by First Trust Advisors LP, the fund invests in companies within the information technology, semiconductors, and semiconductor equipment sectors. It includes a mix of value, growth, and volatile stocks from companies of various market capitalizations.

As of November 18, 2024, the fund had $1.33 billion in assets under management (AUM) and an NAV of $87.19. FTXL has an expense ratio of 0.60%, compared to the category average of 0.58%.

The fund’s top holdings include NVIDIA Corporation (NVDA) with a 10.22% weighting, Intel Corporation (INTC) at 9.50%, Broadcom Inc. (AVGO), and QUALCOMM Incorporated (QCOM) at 8.70% and 7.87%, respectively. It currently has a total of 31 holdings.

The fund pays an annual dividend of $0.47, translating to a 0.54% yield at the prevailing price level. The fund’s four-year average yield is 0.53%. Its dividend payouts have grown at a 38.9% CAGR over the past three years.

Over the past five days, the fund’s net outflow came in at $4.46 million. It has gained 20.9% over the past year to close its last trading session at $87.24.

FTXL’s POWR Ratings reflect its fundamentals. Of the 119 ETFs in the A-rated Technology Equities ETFs group, FTXL is ranked #80. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

To access all of FTXL’s POWR Ratings, click here.

ETF #2: iShares Semiconductor ETF (SOXX)

SOXX invests in stocks of companies operating across information technology, semiconductors, and semiconductor equipment sectors and tracks the NYSE Semiconductor Index. BlackRock Fund Advisors manages this fund.

With $1.34 billion in AUM, its top holdings are NVDA with a 10.39% weighting in the fund, AVGO at 8.85% weight, followed by Advanced Micro Devices, Inc. (AMD), and Texas Instruments Incorporated (TXN) with 7.93% and 6.40% weightings, respectively. The ETF has a total of 30 holdings.

The ETF’s expense ratio is 0.35%, lower than the category average of 0.58%. SOXX fund inflows were $1.66 billion over the past year and $1.36 billion over the past six months.

SOXX pays an annual dividend of $1.46, which translates to a 0.69% yield at the current price level. The fund’s dividend payouts have grown at an 11.4% CAGR over the past three years. Its four-year average yield is 0.83%.

Over the past year, SOXX has gained 25.4% to close the last trading session at $213.94. The fund’s NAV was $214 as of November 18, 2024.

SOXX’s stance is apparent in its POWR Ratings. SOXX is ranked #79 in the same A-rated group. Click here to access all the SOXX ratings.

ETF #1: 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 November 18, SMH had $23.48 billion in assets under management and an NAV of $241.57. Its expense ratio of 0.35% compares to the category average of 0.58%.

The fund’s top holdings include NVDA with a 23.66% weight, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM) with a 13.20% weight, AVGO with a 7.71% weight, and AMD with a 4.38% weight. It has a total of 26 holdings.

SMH’s trailing-12-month dividend of $1.04 yields 0.43% on the current price level, while its four-year average dividend yield is 0.72%. Its dividend payouts have grown at an 11.6% CAGR over the past three years.

SMH has gained 49.8% over the past year and 19.2% over the past nine months to close the last trading session at $241.54. Its fund inflows came in at $6.60 billion over the past year and $3.53 billion over the past six months.

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

It has an A grade for Trade and a B for Buy & Hold. It is ranked #66 out of 119 ETFs in the same Technology Equities ETFs group. To see the POWR Ratings of SMH for Peer, click here.

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SMH shares were trading at $242.59 per share on Tuesday afternoon, up $1.05 (+0.43%). Year-to-date, SMH has gained 38.73%, versus a 25.16% rise in the benchmark S&P 500 index during the same period.