The Best Semiconductor ETF to Buy With $1,000 Right Now
Key Points
The VanEck Semiconductor ETF (SMH) is a market cap-weighted portfolio of the largest U.S.-listed chip stocks.
SMH's biggest competitors use selection strategies that give more emphasis to the sector's smaller companies.
As long as the megacap names are leading, SMH remains the better way to invest in the semiconductor sector.
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Big tech companies, including Microsoft, Amazon, Alphabet, Meta Platforms, and Oracle, are committing hundreds of billions of dollars to capital expenditures in 2026. Most of it will go toward artificial intelligence (AI) infrastructure, with semiconductor chips a big part of that.
If you want a single ETF to capture that trend, the VanEck Semiconductor ETF (NASDAQ: SMH) is the one to own. Year to date (through June 16), the fund is up 71% after returning 49% in 2025. Over the past five years, it's produced an average annual return of just over 38%.
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How SMH constructs its portfolio
SMH tracks the MVIS U.S. Listed Semiconductor 25 index. It's a simple market cap-weighted index of the 25 largest U.S.-listed semiconductor stocks. This means the portfolio tends to be somewhat top-heavy with the largest companies. Nvidia and Taiwan Semiconductor together account for nearly 25% of the portfolio. Add in the allocations to Micron, Advanced Micro Devices, and Intel, and you've got nearly half of it.
| Company | Weight |
|---|---|
| Nvidia | 14.5% |
| Taiwan Semiconductor Manufacturing | 9.3% |
| Micron Technology | 8% |
| Advanced Micro Devices | 7.3% |
| Intel | 7.2% |
Data source: VanEck.
As of this moment, however, that concentration delivers strong exposure to the sector's leaders. Other ETFs, such as the iShares Semiconductor ETF (NASDAQ: SOXX), put caps on individual holding weights. It still has a large-cap tilt, but it's a bit more diluted into smaller mid-cap names. It's a modest difference, but one that can affect performance depending on what's in favor at the moment.
SMH vs. competitors
The two main alternatives to the VanEck Semiconductor ETF are the iShares Semiconductor ETF and the Invesco PHLX Semiconductor ETF (NASDAQ: SOXQ).
When comparing, you could lump SOXX and SOXQ together because they're essentially the same fund. Their selection criteria are very similar, with 74% overlap. The only major difference is the expense ratio. SOXQ's expense ratio of 0.19% is nearly half that of SOXX, making it the winner on cost.
When comparing the VanEck ETF and the Invesco ETF, it really comes down to whether you want more concentrated megacap exposure in this sector. The VanEck one offers this, while the Invesco one gives greater weight to the smaller companies in this sector.
The megacaps have been leading this bull market throughout the AI boom cycle. We may yet see a broadening of these gains, but so far it hasn't happened with any consistency. Eventually, that's likely to change as the growth cycle matures and the longer-term winners emerge.
For now, however, the VanEck Semiconductor ETF is the winner as long as the biggest companies remain the biggest winners.
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David Dierking has positions in iShares Trust - iShares Semiconductor ETF. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Meta Platforms, Micron Technology, Microsoft, Nvidia, Oracle, Taiwan Semiconductor Manufacturing, and iShares Trust - iShares Semiconductor ETF. The Motley Fool has a disclosure policy.
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