The VanEck Semiconductor ETF (SMH) offers investors, and traders, targeted exposure to the semiconductor industry, a critical component of the global technology sector. The ETF, which was launched in December 2011, is designed to track the performance of the MVIS US Listed Semiconductor 25 Index, which includes some of the world’s largest and most influential semiconductor companies.
Semiconductors are seen as the backbone of modern technology, powering devices such as smartphones, computers, data centres, and new technologies like artificial intelligence (AI), autonomous vehicles, and the Internet of Things (IoT). SMH provides investors with a concentrated portfolio of industry leaders, including Nvidia, Taiwan Semiconductor Manufacturing Company (TSMC), and Intel.
As of Dec, 2024, the VanEck Semiconductor ETF’s total net assets were $23.37 billion.
VanEck Semiconductor ETF Performance, Price & Chart
Analysts remain optimistic about the semiconductor industry, with SMH expected to benefit from sustained demand in AI, cloud computing, and edge devices:
Bull Argument: Analysts at Citi noted in mid-November that consensus estimates for semiconductor stocks declined 11% during earnings. However, the investment bank believes the recent selloff in semiconductor stocks is “almost over, and attention will shift to 2025.” The bank sees global semi sales rising another 9% year-over-year in 2025, after a 17% rise in 2024. In addition, Citi says the downside from the industrial end market will clear soon, while a correction in the auto end market should conclude sometime in the first half of 2025. Citi analysts argue that investors should build positions in semiconductor stocks and “get aggressive” going into the first quarter.
Bear Argument: In late 2023, it was reported that “Big Short” investor Michael Burry had added a bearish options position on semiconductors. Meanwhile, some analysts have pointed to bearish technical setups. For example, JPMorgan’s technical strategy team said in September that there was a developing “multiquarter” bearish pattern, which, if completed, would foreshadow a lasting weakness in the PHLX Semiconductor Index.Furthermore, in September, Morgan Stanley’s chief U.S. equity strategist, Mike Wilson, told Bloomberg that the AI investment excitement has diminished, noting that semiconductor stocks had dropped. “A lot of those stocks have really come off. And that makes sense to me. We just got overcooked on the whole AI theme,” commented Wilson.
Our View: The VanEck Semiconductor ETF is a well-structured ETF providing investors access to the rapidly evolving and growing semiconductor industry, with big-name holdings such as Nvidia and Broadcom. Of course, it carries risks due to the cyclical nature of the sector, economic challenges, global supply chain headwinds, and the risk of AI stocks being overvalued. However, it remains a solid option for those who see long-term growth in one of the most innovative industries.
VanEck Semiconductor ETF Performance
After a decline for most of 2022 due to worries about economic activity, as interest rates began to rise, the VanEck Semiconductor ETF has performed extremely well as investors remain bullish on tech stocks and, primarily, artificial intelligence.
| Year | Performance |
|---|---|
| 2024 (YTD) | +41.92% |
| 2023 | +73.38% |
| 2022 | -33.53% |
| 2021 | +42.13% |
| 2020 | +55.54% |
SMH Top Holdings (as of November 14, 2024)
| Company | % Weight |
|---|---|
| FTAI Aviation | 0.61% |
| Sprouts Farmers Market | 0.51% |
| Insmed | 0.40% |
| Applied Industrial Technologies | 0.37% |
| Vaxcyte | 0.37% |
| Mueller Industries | 0.34% |
| Fluor Corp | 0.33% |
| Carpenter Technology | 0.32% |
| HealthEquity | 0.31% |
| Revolution Medicines | 0.30% |
Who Should Buy the VanEck Semiconductor ETF?
SMH is a compelling option for investors seeking exposure to the fast-growing semiconductor sector as well as the growth of artificial intelligence. Here’s who might find SMH appealing:
Investors looking to capitalise on the growth of AI, 5G, and IoT technologies will find the VanEck Semiconductor ETF appealing as semiconductors power these technologies, as mentioned earlier.
Similarly, tech enthusiasts and investors with a bullish outlook on the broader tech sector will also find the ETF appealing as semiconductor stocks will naturally benefit alongside the growth of the tech sector.
Of course, it is also an ETF to assess for those who want to allocate a portion of their portfolio specifically to semiconductors, as well as investors who are looking for long-term growth and can stomach short-term volatility.
However, the ETF is not suitable for risk-averse investors as the semiconductor industry is highly cyclical and prone to volatility.
In addition, income-focused investors may want to look at alternative options as many semiconductor stocks and tech companies reinvest a significant portion of their cashflow into research and development.
