Semiconductor ETFs are currently favorable investment choices due to their strong performance, driven by the increasing demand for semiconductors in AI and modern technology. To that end, investors might consider watching strong semiconductor ETFs: SPDR S&P Semiconductor ETF (XSD), iShares Semiconductor ETF (SOXX), and VanEck Semiconductor ETF (SMH) in 2024.
These ETFs promise high returns, diversification, liquidity, and low fees, making them an attractive option for savvy investors. Despite the industry's cyclical nature, volatility, and concentration risks, the semiconductor sector is poised for robust long-term growth, particularly with advancements in AI. For investors with a long-term perspective and a high-risk tolerance, these ETFs offer compelling potential.
Notably, the Semiconductor Industry Association (SIA) reported global sales of $49.1 billion in May 2024, up 19.3% from last year. This surge stems from heavy investments in advanced chip manufacturing, driving rapid technological advancements. Moreover, increased production, a focus on AI and cloud services, and collaborations on specialized chips have effectively addressed shortages and rising demands.
The global semiconductor market is expected to reach $2.06 trillion by 2032, at a robust CAGR of 14.9%. Given this favorable backdrop, let’s evaluate the three Technology Equities ETFs picks, starting with number three.
ETF #3: SPDR S&P Semiconductor ETF (XSD)
XSD is an exchange-traded fund launched by State Street Global Advisors, Inc. It is managed by SSGA Funds Management, Inc. The fund invests in the public equity markets of the United States, focusing on companies operating in the information technology, semiconductors, and semiconductor equipment sectors. It invests in growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the S&P Semiconductor Select Industry Index by using a representative sampling technique.
With $1.37 billion in assets under management (AUM), XSD’s top holding is Semtech Corporation (SMTC) with a 4.10% weighting, followed by Cirrus Logic, Inc. (CRUS), with a 3.80% weighting, and Monolithic Power Systems, Inc. (MPWR), with 3.74%. It has a total of 40 holdings.
It has an expense ratio of 0.35%, lower than the category average of 0.58%. It currently has a NAV of $230.87. XSD’s fund outflows came in at $64.50 million over the past month.
The fund’s annual dividend of $0.55 yields 0.23% on the current share price. Its four-year average yield is 0.28%. Its dividend payouts have increased at a CAGR of 26.6% over the past three years but decreased by 5.3% over the past five years.
XSD has gained 12.9% over the past year and 16.5% over the past nine months to close the last trading session at $231.01.
XSD’s POWR Ratings reflect a mixed outlook. The XSD’s overall C rating equates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
XSD has a C grade for Buy & Hold and Trade. Of the 119 ETFs in the Technology Equities ETFs group, it is ranked #77. Click here to access all of XSD’s POWR Ratings.
ETF #2: iShares Semiconductor ETF (SOXX)
SOXX is an exchange-traded fund launched by BlackRock, Inc. It is managed by BlackRock Fund Advisors. The fund invests in the public equity markets of the United States, focusing on companies operating in the information technology, semiconductors, and semiconductor equipment sectors. It invests in growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the NYSE Semiconductor Index by using a representative sampling technique.
With $15.13 billion in AUM, the fund has a total of 32 holdings. SOXX’s top holding is Broadcom Inc. (AVGO) with a 9.92% weighting, followed by NVIDIA Corporation (NVDA) with a 9.32% weighting, and Advanced Micro Devices, Inc. (AMD) with 7.52%.
SOXX has an expense ratio of 0.35%, lower than the category average of 0.58%. It currently has a NAV of $227.32. Its fund inflows came in at $2.71 billion over the past year.
The fund’s annual dividend of $1.46 yields 0.64% on the current share price. Its four-year average yield is 0.86%. Its dividend payouts have increased at a CAGR of 12.5% over the past three years and 12.6% over the past five years.
SOXX has gained 39.1% over the past year and 32.4% over the past nine months to close the last trading session at $227.30.
SOXX’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Buy & Hold and Trade. It is ranked #51 in the same group. To access all the POWR Ratings for SOXX, click here.
ETF #1: VanEck Semiconductor ETF (SMH)
SMH is an exchange-traded fund launched and managed by Van Eck Associates Corporation. It invests in the public equity markets of the United States, focusing on companies operating in the information technology, semiconductors, and semiconductor equipment sectors. The fund invests in growth and value stocks of companies across diversified market capitalizations. It seeks to track the performance of the MVIS US Listed Semiconductor 25 Index by using a full replication technique.
With $22.96 billion in assets under management (AUM), SMH’s top holding is NVDA with a 21.60% weighting, followed by Taiwan Semiconductor Manufacturing Company Limited (TSM), with a 13.56% weighting, and AVGO, with 8.45%. SMH has a total of 26 holdings.
SMH has an expense ratio of 0.35%, lower than the category average of 0.58%. It currently has a NAV of $242.24. Its fund inflows came in at $4.71 billion over the past year.
The ETF pays an annual dividend of $1.04, which yields 0.43% on the current price. It has a four-year average dividend yield of 0.91%. Its dividend payouts have increased at a CAGR of 11.6% over the past three years and 5% over the past five years.
SMH has gained 62.1% over the past year and 49.5% over the past nine months to close the last trading session at $242.42.
SMH’s POWR Ratings reflect its promising prospects. The ETF’s overall B rating equates to a Buy in our proprietary rating system.
SMH has a B grade for Buy & Hold and Trade. In the Technology Equities ETFs group, it is ranked #49. Click here to access all of SMH’s POWR Ratings.
What To Do Next?
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SMH shares were trading at $247.56 per share on Friday afternoon, up $5.14 (+2.12%). Year-to-date, SMH has gained 41.57%, versus a 18.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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