7 Best Semiconductor ETFs to Buy Right Now in 2024

7 Best Semiconductor ETFs to Buy in 2024

iShares Semiconductor ETF (SOXX)

“The potential benefits of investing in semiconductor ETFs include coverage to a high-growth sector with strong basic information, diversified across a variety of businesses in the industry, and the opportunity for long-term capital appreciation,” August writes.

Over the last ten years, SOXX has returned an annualised 23.9%, surpassing the overall stock market.

SOXX is one of the most popular semiconductor ETFs on the market, with around $8.8 billion in assets under management, or AUM. Because of its popularity, the ETF has high liquidity, with over 1.4 million shares traded on average over a 30-day period and a 30-day median bid-ask spread of just 0.03%. SOXX follows the ICE Semiconductor Index and has a cost ratio of 0.35%.

VanEck Semiconductor ETF (SMH)

“Especially when looking for semiconductor ETFs (7 Best Semiconductor ETFs to Buy in 2023), investors should consider aspects such as the ratio of expenses to revenues, the underlying index or the standard, the fund’s holdings and diversification strategy, and the ETF’s historical performance,” says August. “It is also important to assess the fund’s liquidity and trading volume to ensure that it is easy to buy and sell.”

SMH, which has more than $9 billion in AUM and an equal 0.35% cost ratio as SOXX, is an ETF that fits these requirements. This ETF tracks the MVIS US Listed Semiconductor 25 Index and presently has a five-star Morningstar rating, indicating that it has beaten the majority of its peer category on a risk-adjusted basis in the past.

SPDR S&P Semiconductor ETF (XSD)

Most semiconductor ETFs use a market cap-weighted approach, which gives equities with bigger market capitalizations correspondingly higher weights. When a handful of mega-cap semiconductor firms (7 Best Semiconductor ETFs to Buy in 2023)dominate the ETF’s top holdings, this method can lead to concentration risk. To address this, investors might look at XSD, which employs a modified equal-weight index.

 

XSD delivers more uniform exposure across 38 large-, mid-, and small-cap U.S. semiconductor firms by following the S&P Semiconductor (7 Best Semiconductor ETFs to Buy in 2023) Select Industry Index. Despite its huge market capitalization, Nvidia accounts for only roughly 3% of this ETF. The ETF carries the same 0.35% expense ratio as SMH and SOXX, making it cost competitive.

First Trust Nasdaq Semiconductor ETF (FTXL)

Most semiconductors ETFs go the extra mile to evaluate possible holdings based on other factors. This is often done to guarantee that the final portfolio fits specified financial health, growth potential, or other requirements. FTXL, which monitors the Nasdaq U.S. Smart Semiconductor (7 Best Semiconductor ETFs to Buy in 2023) Index, is an excellent example. However, its expenditure ratio (0.6%) is greater than that of SOXX, SMH, and XSD.

The FTXL index picks semiconductor firms from the Nasdaq U.S. Benchmark Index and ranks them based on three criteria: trailing 12-month return on assets, trailing 12-month gross income, and momentum in the form of three-, six-, nine-, and twelve-month share price appreciation. Following the ranking of the equities, the worst quartile is removed, and the remaining stocks are weighted based on their trailing 12-month cash flow.

Invesco Dynamic Semiconductors ETF (PSI)

PSI is another five-star Morningstar-rated semiconductor ETF to keep an eye on. This ETF follows the Dynamic Semiconductors (7 Best Semiconductor ETFs to Buy in 2023) Intellidex Index, which, like the index used by FTXL, selects companies using additional screeners. At the present, this involves looking at share price movement, earnings momentum, financial and managerial quality, and value.

PSI currently owns 31 equities, with Nvidia leading the pack with a 6% stake. Broadcom Inc. (AVGO) and Applied Materials Inc. (AMAT) are in second and third position, with 5.5% and 5.2%, respectively. Advanced Micro Devices Inc. (AMD), Nvidia’s major competitor, is now ranked seventh with a 4.5% weighted. The cost ratio for the ETF is 0.55%.

Invesco PHLX Semiconductor ETF (SOXQ)

ETFs with extra filters in their indexes, such as FTXL and PSI, typically incur a higher cost ratio. There is a danger that these higher costs will cut into total results in the long run. SOXQ, which has the lowest expense ratio on our list at 0.19%, is a wonderful alternative to PSI, also provided by Invesco, for cost-conscious investors aiming to prioritise low costs.

SOXQ provides exposure to the 30 biggest U.S. listed semiconductor (7 Best Semiconductor ETFs to Buy in 2023) equities by following the PHLX Semiconductor Sector Index. Nvidia, Broadcom, Intel Corp. (INTC), Texas Instruments Inc. (TXN), and AMD are now among its top holdings. Investors should keep in mind, however, that this ETF is less popular than the preceding alternatives, with only roughly $132 million in AUM.

Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL)

Most of the prior ETFs allow investors to trade options, which can provide investors with increased exposure. Furthermore, investors can buy these ETFs on margin to boost their gains. Investors who do not want to trade options on semiconductor ETFs or leverage their positions with margin can still benefit from SOXL, which has a 0.94% fee ratio.

This leveraged ETF seeks to outperform the ICE Semiconductor (7 Best Semiconductor ETFs to Buy in 2023) Index on a daily basis. SOXL will return 3% if the index rises by 1%. SOXL will decline 3% if the index falls by 1%. Because the leveraged exposure is determined on a daily basis, SOXL is best suited for short-term trading. Long-term SOXL investors may face extremely high volatility and uncertain returns.

FAQ

1: What are semiconductor ETFs and why should I consider investing in them in 2023?

Semiconductor ETFs, or exchange-traded funds, are investment funds that are designed to track the performance of a specific basket of semiconductor-related companies. These ETFs provide investors with exposure to the semiconductor industry without having to purchase individual stocks

2: Which are the 7 best semiconductor ETFs to consider buying in 2023?

These ETFs have different investment strategies and holdings, so it’s essential to research each one’s specific objectives, expense ratios, and performance history to determine which aligns best with your investment goals.

VanEck Semiconductor ETF (SMH)

“Especially when looking for semiconductor ETFs (7 Best Semiconductor ETFs to Buy in 2023), investors should consider aspects such as the ratio of expenses to revenues, the underlying index or the standard, the fund’s holdings and diversification strategy, and the ETF’s historical performance,” says August. “It is also important to assess the fund’s liquidity and trading volume to ensure that it is easy to buy and sell.”

SMH, which has more than $9 billion in AUM and an equal 0.35% cost ratio as SOXX, is an ETF that fits these requirements. This ETF tracks the MVIS US Listed Semiconductor 25 Index and presently has a five-star Morningstar rating, indicating that it has beaten the majority of its peer category on a risk-adjusted basis in the past.

SPDR S&P Semiconductor ETF (XSD)

Most semiconductor ETFs use a market cap-weighted approach, which gives equities with bigger market capitalizations correspondingly higher weights. When a handful of mega-cap semiconductor firms (7 Best Semiconductor ETFs to Buy in 2023)dominate the ETF’s top holdings, this method can lead to concentration risk. To address this, investors might look at XSD, which employs a modified equal-weight index.

 

XSD delivers more uniform exposure across 38 large-, mid-, and small-cap U.S. semiconductor firms by following the S&P Semiconductor (7 Best Semiconductor ETFs to Buy in 2023) Select Industry Index. Despite its huge market capitalization, Nvidia accounts for only roughly 3% of this ETF. The ETF carries the same 0.35% expense ratio as SMH and SOXX, making it cost competitive.

First Trust Nasdaq Semiconductor ETF (FTXL)

Most semiconductors ETFs go the extra mile to evaluate possible holdings based on other factors. This is often done to guarantee that the final portfolio fits specified financial health, growth potential, or other requirements. FTXL, which monitors the Nasdaq U.S. Smart Semiconductor (7 Best Semiconductor ETFs to Buy in 2023) Index, is an excellent example. However, its expenditure ratio (0.6%) is greater than that of SOXX, SMH, and XSD.

The FTXL index picks semiconductor firms from the Nasdaq U.S. Benchmark Index and ranks them based on three criteria: trailing 12-month return on assets, trailing 12-month gross income, and momentum in the form of three-, six-, nine-, and twelve-month share price appreciation. Following the ranking of the equities, the worst quartile is removed, and the remaining stocks are weighted based on their trailing 12-month cash flow.

Invesco Dynamic Semiconductors ETF (PSI)

PSI is another five-star Morningstar-rated semiconductor ETF to keep an eye on. This ETF follows the Dynamic Semiconductors (7 Best Semiconductor ETFs to Buy in 2023) Intellidex Index, which, like the index used by FTXL, selects companies using additional screeners. At the present, this involves looking at share price movement, earnings momentum, financial and managerial quality, and value.

PSI currently owns 31 equities, with Nvidia leading the pack with a 6% stake. Broadcom Inc. (AVGO) and Applied Materials Inc. (AMAT) are in second and third position, with 5.5% and 5.2%, respectively. Advanced Micro Devices Inc. (AMD), Nvidia’s major competitor, is now ranked seventh with a 4.5% weighted. The cost ratio for the ETF is 0.55%.

Invesco PHLX Semiconductor ETF (SOXQ)

ETFs with extra filters in their indexes, such as FTXL and PSI, typically incur a higher cost ratio. There is a danger that these higher costs will cut into total results in the long run. SOXQ, which has the lowest expense ratio on our list at 0.19%, is a wonderful alternative to PSI, also provided by Invesco, for cost-conscious investors aiming to prioritise low costs.

SOXQ provides exposure to the 30 biggest U.S. listed semiconductor (7 Best Semiconductor ETFs to Buy in 2023) equities by following the PHLX Semiconductor Sector Index. Nvidia, Broadcom, Intel Corp. (INTC), Texas Instruments Inc. (TXN), and AMD are now among its top holdings. Investors should keep in mind, however, that this ETF is less popular than the preceding alternatives, with only roughly $132 million in AUM.

Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL)

Most of the prior ETFs allow investors to trade options, which can provide investors with increased exposure. Furthermore, investors can buy these ETFs on margin to boost their gains. Investors who do not want to trade options on semiconductor ETFs or leverage their positions with margin can still benefit from SOXL, which has a 0.94% fee ratio.

This leveraged ETF seeks to outperform the ICE Semiconductor (7 Best Semiconductor ETFs to Buy in 2023) Index on a daily basis. SOXL will return 3% if the index rises by 1%. SOXL will decline 3% if the index falls by 1%. Because the leveraged exposure is determined on a daily basis, SOXL is best suited for short-term trading. Long-term SOXL investors may face extremely high volatility and uncertain returns.

FAQ

1: What are semiconductor ETFs and why should I consider investing in them in 2023?

Semiconductor ETFs, or exchange-traded funds, are investment funds that are designed to track the performance of a specific basket of semiconductor-related companies. These ETFs provide investors with exposure to the semiconductor industry without having to purchase individual stocks

2: Which are the 7 best semiconductor ETFs to consider buying in 2023?

These ETFs have different investment strategies and holdings, so it’s essential to research each one’s specific objectives, expense ratios, and performance history to determine which aligns best with your investment goals.