What Companies Are In The VanEck Semiconductor ETF?

There’s a lot to love about the VanEck Semiconductor ETF, and it’s easy to see why. For one, this ETF has been consistently ranked among the best Semiconductor ETFs to buy. Additionally, it holds over $23.09 billion in assets under management (AUM) — over $10 billion more than its next contender, iShares Semiconductor ETF (SOXX).

However, as appealing as it might look, it’s not for everyone so before you decide to buy this ETF, you must understand what exactly you’re getting yourself into.

25% Annually Is Reason Enough to Buy VanEck Semiconductor ETF 

In 2011, the VanEck family-owned investment firm launched the VanEck Semiconductor ETF (SMH). Since then, it has been on an upward trajectory (performance-wise) and has grown at an annualized rate of over 25%.

This ETF tracks or seeks to replicate the MVIS US Listed Semiconductor 25 Index (MVSMHTR). It’s a passively managed ETF, which means it’s transparent, low-cost, and tax-efficient.

SMH Holdings

While 100% concentrated in the technology industry, SMH provides diversified exposure to the Semiconductors sector.

It holds 26 stocks, with some of its top holdings being mega caps, Nvidia Corp (NVDA), Taiwan Semiconductor Manufacturing Co Ltd (TSM), and Broadcom Inc. (AVGO). Summatively, the three holdings account for about 43% of Van Eck Semiconductor ETF’s overall exposure.

What companies are in the VanEck semiconductor ETF? In addition to NVIDIA, Broadcom and Taiwan Semiconductor, top holdings include:

• Advanced Micro Devices Inc. (AMD)
• ASML Holding NV – New York Shares (ASML)
• Micron Technology Inc. (MU)
• Applied Materials Inc. (AMAT)
• Lam Research Corp. (LRCX)
• Texas Instruments Inc. (TXN)
• Intel Corp. (INTC)

VanEck also has a geographical diversification exposure. It holds companies across the world, including the U.S. (primarily), the Netherlands, and Taiwan so any investment isn’t exposed to just one country’s risk.

Cost Metrics

The expense ratio for the VanEck Semiconductor ETF is 0.35%. This is pretty inexpensive because and well under the average expense ratio for semiconductor ETFs, which is 0.83%. So, say you invest $100,000 in the fund. You’ll pay annual operating expenses amounting to $350.

On the income front, VanEck’s Semiconductor ETF’s last dividend yield was $1.0713 per share in December 2024.

Performance

While you can certainly nitpick this ETF for its concentrated holdings, you simply can’t ignore the fact that the performance has more than outdone itself and the market more generally.

It has far outperformed broader market indices over the last 10 years. For instance, since 2014, the total returns for this ETF are nearly 1,000%.

As for its compound annual growth rate, or CAGR, over the last 10 years, it’s currently at 27%. This rate is far much higher compared to the S&P 500’s 13% and the Nasdaq Composite’s 16%.

The Case for Investing in SMH

Some of the facts presented in the previous section — performance, cost, and holdings — build a pretty strong case for the VanEck Semiconductor ETF. But those aren’t the only factors you should go by. There are several reasons why investing in SMH might be a good holding:

Growth Drivers in the Sector

First and foremost, the semiconductor sector has a long-term growth potential. This growth is mostly fueled by the increased adoption of technologies, such as AI, 5G, and IoT, all of which are major components of semiconductors.

Additionally, government support initiatives like the U.S.’s CHIPS Act — which encourages investment in semiconductor manufacturing — will benefit companies like Taiwan Semiconductor Manufacturing Co Ltd, ASML Holding NV, and Intel Corp.

These organizations, being major holdings of the VanEck Semiconductor ETF, point toward increased investments and growth in the sector.

Strong Fundamentals

The companies that make up this semiconductor ETF — especially the top ten ones — are industry leaders and have consistent revenue growth and profit margins. Plus, the requirements for inclusion in the ETF show just how stable these companies have historically been and are likely to remain.

For instance, the companies must have a market cap of over $150 million, with at least a three-month average of $1 million in daily trading volumes and 250,000 shares in trading volumes every month for the last six months. Of course, companies like NVIDIA and TSM dwarf these figures generating billions in profits alone, let alone revenues.

Risks and Challenges

An analysis of the SMH isn’t complete without pointing out the risks you may experience should you choose to invest in it.

While this semiconductor ETF may have organizational diversification, it exposes you to considerable sector risk because and semiconductors are notoriously cyclical. The boom bust cycle that it typically follows leaves investors vulnerable to sharp dips when the tide turns against them.

Additionally, a few top holdings dominate the ETF — 43% of the ETF is only three companies. This makes the ETF particularly vulnerable to concentration risk should these top companies experience major losses.

Lastly, be adequately prepared for short-term volatility in this semiconductor ETF due to the cyclical nature because there will be periods of oversupply and reduced demand — both of which can cause stock prices to go down.

So, Is SMH ETF a Buy?

If you’re comfortable with high volatility and have a long-term, growth-oriented outlook, this ETF hits the mark. Case in point, if you invested $100,000 in the VanEck Semiconductor ETF in 2014, right now the investment is worth about $1 million, given the 1,000% growth total returns growth rate, excluding management fees and dividend yields.

With AI acting as a strong tailwind and forecasted to continue to do so in the coming years, SMH has the potential to be a valuable ETF in many a portfolio.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.