10 Best Semiconductor ETFs

Published on August 31, 2023 at 8:29 pm by Hamna Asim in ETF Trading, News

In this article, we discuss 10 best semiconductor ETFs. If you want to skip our discussion on the semiconductor market, head directly to 5 Best Semiconductor ETFs.

Ever since the world has moved towards digital transformation, the semiconductor market has created quite the buzz. Semiconductors are crucial components for technology, be it smartphones, computers, electric vehicles, or healthcare, the demand for semiconductors is immense. While the demand for semiconductors was always high, the pandemic induced a global shortage. According to S&P Global, the industry generally operated a just-in-time inventory system, which meant that raw materials were acquired as per sale orders. However, as the world was locked down during the pandemic, the industry experienced a major supply chain disruption. Not only was transportation halted, but as the world moved towards an online model, the demand for electronic devices soared. Consequently, this caused major delays in production for components used in electronics. While industries operated at roughly 80% of their utilization before the pandemic, companies still struggled to cope with the post-pandemic demand, despite operating at 95% capacity.

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According to the The Semiconductor Industry Association, chip sales have decreased by roughly 22% in 2023, as compared to the previous year. As of April 2023, the global semiconductor market reported sales worth $40 billion, which increased merely 0.3% than that of March 2023. This figure was over $50.9 billion in April 2022. While monthly sales have increased in China and Japan – Europe, Asia, and America have all experienced declines. As per World Semiconductor Trade Statistics (WSTS), the industry is expected to bounce back in 2024. As of May 2023, WSTS expects the market to grow by nearly 12% in 2024. While semiconductor usage is expected to increase in all major categories, this increase will be driven by the Memory segment, which is expected to rise by 40% over the year.

As reported by Fortune Business Insights, the semiconductor market size was estimated at almost $528 billion in 2021. This is expected to grow to nearly $1381 billion over the next 7 years. This can be generally attributed to the increased dependence on the internet-of-things. While the automotive industry continues to grow, innovation in artificial intelligence, machine learning, and cloud computing is only going to boost the demand for integrated chips.

Also Read: 10 Best Semiconductor Stocks To Buy For The AI Boom

Recently, KPMG interviewed over 150 executives in the semiconductor space. According to their reports, 81% of the executives expect revenues to increase, as supply chain issues start to ease up in 2023. As per Mark Gibson, the Global Sector Head of Technology, Media & Telecommunications at KPMG International, the industry’s expectations of an increase in revenue hint that companies are “almost at the point of having excess inventory”. Mr. Gibson considers this a step in the right direction, as supply chain constraints alleviate over the next few months. In line with this, Gartner reported that while the demand for computers and smartphones stabilize, the industrial, automotive, and military sectors are set to dominate the demand. This means that the semiconductor industry is expected to experience more business spending than consumer spending.

This article discusses some of the best semiconductor ETFs that provide investors with access to market leaders like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD).

Our Methodology

We used an ETF screener and filtered out the best performing semiconductor ETFs based on 5-year share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These ETFs have amassed significant gains over the past 5 years. The list is ranked in ascending order of the 5-year share price performance as of August 31, 2023.

Photo by Redd on Unsplash

Best Semiconductor ETFs

10. Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI)

5-Year Performance as of August 31: 5.42%

Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI)’s key focus is to capitalize on the growth potential of the technology industry, by investing in companies engaged in the semiconductor market. As of August 1, the fund reflects on the performance of 37 such companies, with a net expense ratio of 0.75%. Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI) was established on March 29, 2022.

Lam Research Corporation (NASDAQ:LRCX) is the largest holding of Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI). The company is involved in the research, manufacture, and commercialization of semiconductor devices and integrated circuits. According to Insider Monkey’s second quarter database, 69 hedge funds were bullish on Lam Research Corporation (NASDAQ:LRCX), as opposed to 64 hedge funds from the past quarter.

Saltlight Capital said this about Lam Research Corporation (NASDAQ:LRCX) in its second quarter 2023 investor letter:

“Lam Research Corporation (NASDAQ:LRCX), a leading toolmaker for memory and logic semiconductor fabs, has demonstrated its resilience and competitive positioning in the semiconductor ecosystem. Chip densities are now approaching the limits of physics and Moore’s law is stretched to its atomic limitations. Future innovation is around 3D stacks of chips and advanced packaging. LAM has heavily invested in tools that push innovation at the atomic level. Despite this investment, it requires little shareholder capital to grow and therefore it returns capital through healthy dividends and share repurchases. LAM has been a wonderful performer for us over the last two years.”

9. Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ)

5-Year Performance as of August 31: 14.76%

Since its inception in June 2021, Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) tracks price and yield performance of the PHLX Semiconductor Sector Index. The index gauges the performance for 30 of the largest companies involved in the semiconductor industry. This includes a wide set of applications, such as microprocessors and integrated circuits. As of August 25, the ETF maintains a total expense ratio of 0.19%. The fund was launched on June 11, 2021. It is one of the best semiconductor ETFs to watch.

Texas Instruments Incorporated (NASDAQ:TXN) is one of the largest holdings of Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ). It specializes in the manufacturing and distribution of semiconductors to manufacturers all around the world, operating within two segments – Analog and Embedded Processing. According to Insider Monkey’s second quarter database, 56 hedge funds were bullish on Texas Instruments Incorporated (NASDAQ:TXN), while 52 hedge funds had invested in the company during the previous quarter.

Similar to NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), Texas Instruments Incorporated (NASDAQ:TXN) is one of the best semiconductor stocks to watch.

The London Company Large Cap Strategy said this about Texas Instruments Incorporated (NASDAQ:TXN) in its second quarter 2023 investor letter:

“Texas Instruments Incorporated (NASDAQ:TXN) – TXN shares declined 2% during the quarter. Demand was weaker in all markets except auto. While revenue was down 11% due to the slowing economy, we believe the outlook is positive. The company continues to invest in manufacturing facilities and should benefit from increased spending related to the CHIPS act. TXN is exposed to various end markets across the economy (e.g. automotive industrials). We believe growth in analog semiconductor content demand, in most markets, will drive TXN.”

8. Strive U.S. Semiconductor ETF (NYSE:SHOC)

5 Year Performance as of August 31: 47.95%

Strive U.S. Semiconductor ETF (NYSE:SHOC) takes a passive approach in its aim to provide exposure to the American semiconductor industry using a cost-effective index product. Introduced on October 6, 2022, the fund intends to enhance the value of companies by engaging in corporate governance strategies, such as voting on proxy shares and actively collaborating with management teams and boards to encourage a commitment to excellence. As of August 28, it holds a portfolio of 31 stocks, with net assets worth $36.66 million and an expense ratio of 0.40%. Strive U.S. Semiconductor ETF (NYSE:SHOC) is one of the best semiconductor ETFs to buy.

Intel Corporation (NASDAQ:INTC) is a significant holding of Strive U.S. Semiconductor ETF (NYSE:SHOC). On July 27, Intel Corporation (NASDAQ:INTC) announced a Q2 revenue of $12.9 billion, along with a non-GAAP EPS of $0.13, exceeding the market consensus by $760 million and $0.16, respectively.

According to Insider Monkey’s second quarter database, 71 hedge funds were bullish on Intel Corporation (NASDAQ:INTC). In contrast, 68 hedge funds had invested in the company during the last quarter.

ClearBridge Large Cap Growth Strategy said this about Intel Corporation (NASDAQ:INTC) in its Q4 2022 investor letter:

“A third approach to return generation is purchasing idiosyncratic businesses that largely control their own destiny. Intel Corporation (NASDAQ:INTC), which we purchased in the first quarter on the premise that it would develop a leading domestic foundry business, has struggled with execution missteps and product delays. We are maintaining the position to provide ongoing exposure to semiconductors.”

7. Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL)

5 Year Performance as of August 31: 112.86%

Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL) is a heavily leveraged ETF that is focused on achieving daily returns that are 300% of the targeted benchmark, which is ICE Semiconductor Index (ICESEMIT). Despite the 3 times leverage, the fund explicitly tracks daily returns for 30 of the largest semiconductor companies. Introduced in March 2010, the fund maintains an expense ratio of 0.94%. Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL) is one of the top semiconductor ETFs.

Broadcom Inc. (NASDAQ:AVGO) is the largest holding for Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL)’s underlying index. Broadcom Inc. (NASDAQ:AVGO) specializes in the production of semiconductors devices and services, operating under two major segments – Semiconductor Solutions and Infrastructure Software. According to Insider Monkey’s second quarter database, a total of 72 hedge funds were bullish on Broadcom Inc. (NASDAQ:AVGO). This number remained unchanged from the last quarter.

Here is what Aristotle Atlantic Partners has to say about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2023 investor letter:

“Broadcom contributed to outperformance, as the company is seen as a key beneficiary of the investment in generative Artificial Intelligence (AI) and Large Language Models (LLM). The company’s Application-Specific Integrated Circuit (ASIC) chips are being custom-built for customers to use in their data centers for accelerated computing. Broadcom’s networking chipsets are also expected to see increased levels of demand, as customers increase investments to enable the high-speed data transfer required by advanced AI training and inference. The company also announced a new multi-year supplier relationship with Apple, the company’s largest customer.”

6. First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL)

5 Year Performance as of August 31: 120.89%

The First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL) aims to achieve investment outcomes that mimic the price and yield of the Nasdaq US Smart Semiconductor™ Index, excluding the fees and expenses of the fund. Launched in September 2016, First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL)’s total net assets are valued at $1.24 billion as of August 30, while the expense ratio is 0.60%.

Micron Technology, Inc. (NASDAQ:MU) is a significant holding of First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL). The company develops semiconductor devices for storage solutions within four segments – Compute and Networking Business Unit, Mobile Business Unit, Embedded Business Unit, and Storage Business Unit. According to Insider Monkey’s second quarter database, 86 hedge funds were bullish on Micron Technology, Inc. (NASDAQ:MU). This number increased from 73 hedge funds from the past quarter.

Similar to NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), Micron Technology, Inc. (NASDAQ:MU) is one of the best semiconductor stocks.

Here is what Claret Asset Management has to say about Micron Technology, Inc. (NASDAQ:MU) in its Q3 2022 investor letter:

“Inflation is still higher than interest rates… not an incentive to save for most people. Either inflation must come down or interest rates have to go up further. Or both. And probably both. Now that they are taking the punch bowl away and the party’s over, what happens next? For whatever reason, the stock market seems to always precede the economic reality: Micron reached a high of $98.45 on January 5th, 2022 and is trading at $50.00 today.”

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