This article takes a look at how semiconductor exchange-traded funds (ETFs) can give investors a simple, diversified way to catch the AI-driven chip boom. We’ll break down how different indexing and weighting methods shape risk and return, highlight five top ETFs, and touch on what you might want to think about before putting your money into this space.
Understanding semiconductor ETFs: exposure, indexing, and costs
Semiconductor ETFs let you get broad exposure to the chip industry without picking individual stocks. In the last five years, demand across the sector and the rise of AI have pushed these funds to some impressive gains.
The funds here use a mix of indexing strategies—equal-weighted, market-cap weighted, and factor-weighted. They also come with varying expense ratios, so you can pick what fits your goals and wallet.
Top semiconductor ETFs to consider
Here are five established options that check boxes like industry exposure, solid long-term returns, reasonable fees, and no leveraged or inverse strategies. I’ll give a quick rundown of each fund’s indexing approach, recent performance, and what stands out about their holdings or weighting style.
VanEck Semiconductor ETF (SMH)
SMH tracks the MVIS US Listed Semiconductor 25 Index. Its setup gives you broad exposure to leading chipmakers with a transparent, rules-based approach.
The fund’s one-year and five-year returns show strong momentum in major semiconductor names, thanks to the AI wave and steady industry demand.
- Expense ratio: 0.35%
- Index tracked: MVIS US Listed Semiconductor 25 Index
- One-year return: 74.3%
- Five-year annualized return: 29.0%
- Top holdings: Nvidia, TSM (Taiwan Semiconductor), Broadcom, ASML
Invesco Semiconductors ETF (PSI)
PSI follows the Dynamic Semiconductor Intellidex Index, leaning into earnings strength, price momentum, and value factors. If you want a factor-aware approach in semiconductors, this fund balances growth and value signals pretty well.
- Expense ratio: 0.56%
- Index tracked: Dynamic Semiconductor Intellidex Index
- One-year return: 92.2%
- Five-year annualized return: 21.9%
- Notes on strategy: Emphasizes earnings and price momentum and value factors
iShares Semiconductor ETF (SOXX)
SOXX passively tracks the NYSE Semiconductor Index, aiming to capture performance from the biggest U.S.-listed chipmakers. It’s known for its liquidity and low tracking error, so it’s a go-to for many investors seeking broad sector exposure.
- Expense ratio: 0.34%
- Index tracked: NYSE Semiconductor Index
- One-year return: 70.2%
- Five-year annualized return: 21.9%
- Top holdings: Broadcom, Nvidia, Micron, AMD
First Trust Nasdaq Semiconductor ETF (FTXL)
FTXL uses the Nasdaq U.S. Smart Semiconductor Index, with weights based on things like gross income and return on assets. This gives the fund a bit of a quality tilt, favoring financially healthier chipmakers.
- Expense ratio: 0.60%
- Index tracked: Nasdaq U.S. Smart Semiconductor Index
- One-year return: 89.6%
- Five-year annualized return: 21.2%
- Weighting approach: Metrics-based (gross income, ROA)
State Street SPDR S&P Semiconductor ETF (XSD)
XSD uses an equal-weighted take on the S&P Semiconductor Select Industry Index, giving balanced exposure that can boost diversification. It puts more emphasis on smaller- and mid-cap names alongside the big players, so you’re not just riding on the usual giants.
- Expense ratio: 0.35%
- Index tracked: S&P Semiconductor Select Industry Index (equal-weighted)
- One-year return: 52.7%
- Five-year annualized return: 14.7%
- Notable characteristics: Focus on smaller- and mid-cap names (e.g., Cirrus Logic, Marvell)
How index design shapes risk and opportunity
The five funds above really show how index design can change how a portfolio behaves. Equal-weighted indices like XSD tilt toward smaller companies, which might offer higher growth but also more ups and downs.
Market-cap–weighted funds like SMH and SOXX pile more into the biggest players, which usually means steadier liquidity and smoother returns. Factor-aware picks like PSI add a tilt toward earnings quality and momentum, and FTXL’s quality metrics try to favor healthier financial profiles.
What to consider before investing in semiconductor ETFs
Thinking about these funds? Here are a few key factors to keep in mind before you jump in:
- Industry exposure—All five give you broad semiconductor exposure, but the underlying index matters.
- Historical performance—Five-year and one-year returns vary quite a bit, depending on style and sector cycles.
- Expense ratio—Fees go from 0.34% to 0.60%. Over time, that can add up.
- Weighting approach—Equal-weighted, market-cap weighted, and factor-weighted strategies all come with their own risk and return quirks.
- Top holdings and concentration—Some funds lean heavily on a few mega-cap names, while others spread things out more.
Bottom line
Investors looking to ride the AI-driven chip boom might want to check out semiconductor ETFs. These funds can give you a cost-efficient and diversified way to get in on the action.
It’s worth taking a closer look at how each fund builds its index and weights its holdings. That way, you can pick an ETF that actually lines up with your risk tolerance and time horizon.
Some folks might lean toward the momentum tilt of PSI. Others could prefer the mega-cap focus of SMH or SOXX.
If you care more about quality, FTXL might catch your eye. Or maybe you want broader exposure to smaller and mid-sized chipmakers—then XSD could make sense.
Here is the source article for this story: Best Semiconductor ETFs for 2026: 5 Top AI Chip Funds to Buy- MarketWise