The semiconductor industry has been attracting attention recently along with the evolution of AI.
There are many attractive companies such as NVIDIA, TSMC, and Broadcom.
Semiconductors are essential, supporting not only AI but also various fields such as smartphones, automobiles, and data centers.
I am also interested in semiconductor stocks myself.
However, when researching individual stocks, these kinds of worries arise.
“In the end, which company is the best?”
“Even if they are growing now, will they be able to maintain their competitiveness in a few years?”
“What will happen to the stock price when the AI boom settles down?”
While the semiconductor industry is expected to grow, it is also an industry where performance and stock prices fluctuate significantly depending on technological innovation, capital investment trends, and the economy.
That is where ETFs, which allow you to invest in multiple semiconductor-related companies at once, become an option.
This time, I will introduce three ETFs to consider when you cannot decide which semiconductor stocks to choose.
1. VanEck Semiconductor ETF (SMH)
The first one I would like to introduce is the VanEck Semiconductor ETF (SMH).
SMH is an ETF that allows you to invest in companies representing the semiconductor industry, such as NVIDIA, TSMC, Broadcom, and AMD, all at once.
The appeal is that you can broadly capture the growth of the semiconductor industry without having to select individual stocks one by one.
On the other hand, it is not a perfectly equally diversified ETF because it tends to have a high investment ratio in large-cap stocks like NVIDIA.
In other words, it is a product that, while investing in the entire semiconductor industry, is strongly influenced by the performance and stock prices of specific leading companies.
The expense ratio is 0.35% per year.
I think it is a strong option for those who want to actively capture the growth of the semiconductor industry.
2. iShares Semiconductor ETF (SOXX)
Next, I would like to introduce the iShares Semiconductor ETF (SOXX).
This is also an ETF that invests in semiconductor-related companies, and its investment targets include a variety of companies such as NVIDIA, AMD, Intel, and semiconductor manufacturing equipment companies.
Like SMH, it is a product that concentrates investment in the semiconductor industry, but the index it aims to track and the method of incorporating stocks are different.
The expense ratio is 0.33% per year.
I think it would be interesting to compare it with SMH and check which companies it invests in and to what extent before choosing.
③ SPDR S&P Semiconductor ETF (XSD)
The third one is the SPDR S&P Semiconductor ETF (XSD).
The feature of XSD is that it tracks an index that incorporates stocks in a relatively equal manner so as not to be too biased toward specific large-cap stocks.
Therefore, you can expect price movements different from those of SMH and SOXX.
It is an ETF that can be considered if you want to capture the growth of mid-sized companies as well as large semiconductor companies.
However, even if the constituent stocks are diversified, the investment target is concentrated in the semiconductor industry. If the entire industry declines, XSD may also drop significantly in price.
The expense ratio is 0.35% per year.
Comparing the 3 ETFs
ETF Expense Ratio (Annual) Features SMH 0.35% Focuses on investment in large, leading semiconductor companies SOXX 0.33% Invests broadly in semiconductor-related companies XSD 0.35% Relatively equal stock composition
*Expense ratios are based on information published by each management company. Stock composition and ratios are subject to change.
ETFs do not guarantee safety
I have introduced semiconductor ETFs so far, but there are some points to be aware of.
That is, buying an ETF does not eliminate risk.
Even if you can diversify across multiple companies, as long as you are investing in the same industry—semiconductors—you may suffer large losses if the entire industry performs poorly.
Also, if expectations for AI are overly priced into the stock price, the stock price may fall even if the company’s performance is growing.
That is precisely why I believe it is necessary to consider not only growth potential but also whether the current stock price is reasonable.
How I would think about it
While I am personally interested in companies that benefit from the AI boom, I also value not concentrating too much capital in a specific industry.
If it is difficult to analyze and select semiconductor companies one by one, utilizing ETFs is a rational option.
Among them, if you want to actively capture the growth of the semiconductor industry, you can consider SMH, or if you want to compare different stock compositions, you can also consider SOXX or XSD.
However, I would not make semiconductor ETFs the core of my asset management; instead, I would consider holding them with a portion of my funds aimed at growth, while keeping diversified investments like global stocks as the foundation.
In long-term investing, it is just as important not to jump in when expectations are too high as it is to find sectors with growth potential.
Precisely because I believe in the future of the semiconductor industry, I want to think about an investment method that suits me rather than rushing to choose individual stocks.
If you were to invest in semiconductors, would you choose individual stocks or ETFs?
Please let me know in the comments.