What are the best semiconductor ETFs for beginners?

The best semiconductor ETFs if you're a beginner are the ones that most closely match your own personal investment objectives and risk tolerance. Generally speaking, beginners should stick with the biggest, most liquid ETFs that have a track record of solid, long-term investment returns.

Should I invest in semiconductor ETFs in 2025?

If you're a contrarian, 2025 could be a good time to pick up some shares of a semiconductor ETF. While past performance is no guarantee of future results, historically speaking, picking up shares of a semiconductor ETF while the industry is in a bear market has paid off over the long run. But you shouldn't venture near a semiconductor ETF if you have a low risk tolerance, as you can be assured that it will be a bumpy ride.

Which semiconductor ETFs pay dividends?

Although semiconductor ETFs aren't a great source of income, many of them do pay small dividends. SOXX, for example, pays a current dividend yield of 0.62%, while SMH pays an annual dividend that varies.

Are semiconductor ETFs good for long-term growth?

Semiconductor ETFs can be highly volatile over the short term but have provided solid returns historically for long-term investors.

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Best Semiconductor ETFs for 2025

April 21, 2025

8 min Read

Written by John Csiszar

Edited by Nupur Gambhir

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Semiconductor stocks offer the potential for high long-term returns for investors who can handle their cyclical, “boom or bust” nature. When the economy is doing well, semiconductors are usually leading the way, since the chips and other electronic equipment they produce are vital to a growing economy. But if there’s a recession, look out below — demand for these hot stocks, and the products they sell, can fall off a cliff. It’s this very fear of a recession, coupled with the tariff talk coming out of Washington, that has sunk the semiconductor index thus far in 2025.

As of Apr. 17, the iShares Semiconductor Index ETF (SOXX) is down over 23% on a YTD basis. But led by industry heavyweights like Nvidia (NVDA), the index is likely to bounce if and when the economy resumes its typical path. If you’ve got the stomach for it, it might be a good time to start looking at the top semiconductor ETFs.

Best Semiconductor ETFs in 2025

Here’s a quick overview of the differences between each of the top semiconductor ETFs, including a list of pros and cons and a summary comparison table.

1. Invesco PHLX Semiconductor ETF (SOXQ)

This portfolio focuses on the 30-largest semiconductor names.

Pros: Offers exposure to the names most well-known to investors, such as Nvidia, Broadcom and Advanced Micro Devices.

Cons: ETF is market-cap weighted, meaning it can be top-heavy. Its current allocation to Nvidia, for example, is 12.15%.

2. Invesco Semiconductors ETF (PSI)

This ETF tracks the Dynamic Semiconductor Intellidex Index of 30 top semi names.

Pros: Offers a more balanced exposure to top semi names. For example, its top holdings — KLA Corp., Qualcomm, Broadcom, Applied Materials, Nvidia, LAM Research, Analog Devices, and Texas Instruments — all have a weighting of about 5% to 6%.

Cons: Has a relatively high expense ratio.

3. iShares Semiconductor ETF (SOXX)

The iShares Semiconductor ETF tracks the NYSE Semiconductor Index.

Pros: SOXX is one of the most liquid and balanced ETFs, with the top 10 holdings ranging from 4.00% to 8.58% of the ETF’s portfolio. It receives a 4-star rating from Morningstar.

Cons: Even within its own category, Morningstar ranks the risk of this fund as “high.”

4. VanEck Semiconductor ETF (SMH)

This ETF is slightly different, as it tracks the MVIS U.S.-Listed Semiconductor 25 Index.

Pros: Offers a different stock balance than the NYSE Semiconductor trackers.

Cons: SMH has a very concentrated portfolio, with Nvidia and Taiwan Semiconductor alone comprising over 31% of the entire fund.

5. SPDR S&P Semiconductor ETF (XSD)

This ETF has more exposure to the small- and mid-cap sector of the semiconductor market, as it tracks the S&P Semiconductor Select Industry Index.

Pros: Exposure to a broader base of smaller semiconductor names

Cons: May court more risk by owning less-proven names.

ETF Name	AUM	Expense Ratio	YTD Return	5-Year Return
Invesco PHLX Semiconductor ETF (SOXQ)	$338.6 million	0.19%	-23.72%	19.72%
Invesco Semiconductors ETF (PSI)	$523 million	0.56%	-27.77%	104.21%
iShares Semiconductor ETF (SOXX)	$10.128 billion	0.35%	-23.35%	115.92%
VanEck Semiconductor ETF (SMH)	$19.16 billion	0.35%	-21.31%	191.47%
SPDR S&P Semiconductor ETF (XSD)	$907 million	0.35%	-30.45%	83.83%

Why Invest in Semiconductor ETFs?

Semiconductor stocks are booming as demand for their chips, which power everything from smartphones and gaming consoles to cryptocurrency and automobiles, rises exponentially. While investors can earn sizable returns owning individual semiconductor stocks, they are notoriously volatile. Market leader Nvidia, for example, sports an incredible beta of 1.96, meaning it is 96% more volatile than the stock market as a whole.

In other words, if you lose sleep every night over the ups and downs in the S&P 500, owning an individual semiconductor stock like Nvidia won’t contribute to restful nights. But this doesn’t mean you should avoid the sector as a whole. Semiconductors are an increasingly important part of the global economy, and the artificial intelligence boom is only adding to this demand. If you’re looking for high growth in your portfolio, you should consider at least some allocation to the sector — and semiconductor ETFs can be a way to get exposure to the sector without tying your fortunes to a single company.

A five-year comparison of the iShares Semiconductor ETF (SOXX) and the SPDR S&P 500 ETF Trust (SPY) — the largest publicly-traded S&P 500 index fund — shows the upside potential of semiconductor ETFS. Even though the SOXX ETF has gotten crushed on a YTD basis, falling 22.61% vs. the SPY’s 9.91%, the SOXX has still outperformed on 5-year basis, by a 17.67% to 14.59% margin, according to ETF.com.

Still, even with the high returns and limited diversification that they can provide, semiconductor ETFs are far from risk-free. In addition to the high volatility that the sector exhibits on a day-to-day basis, the sector is also particularly susceptible to market cycles, adding to its “boom-or-bust” nature. Regulatory concerns are also a constant danger for the industry, something that an ETF can’t diversify away.

Semiconductor ETFs vs. Other Investment Options

Investing is all about making choices. If you put your money into a semiconductor ETF, it by definition means that you are choosing that ETF ahead of other possible options. Before you make this type of decision, you should compare the pros and cons of semiconductor ETFs with those of other investments. Here are some things to consider:

Investment	Pros	Cons
Semiconductor ETFs	High growth; some level of diversification within the industry	Diversification is limited, as industry stocks tend to trade in tandem; ETFs have annual fees, although typically quite low
Semiconductor stocks	Direct exposure to a specific company’s growth; no expense ratio	No fees or expenses, if traded through a zero-commission broker; lack of diversification could lead to big losses
Blue-chip ETFs/stocks	Less volatile/risky than a semiconductor-focused portfolio; typically pay consistent and often rising dividends	Potential returns are generally lower in exchange for the lower risk profile; cash dividends are taxable
Diversified mutual funds/ETFs	True, broad diversification can defend against falling prices in any one industry; professional investment management	Individual stocks often provide a higher potential return, particularly within the semiconductor industry

Risks of Investing in Semiconductor ETFs

Semiconductor ETFs are generally less volatile than individual stocks like Nvidia because they own a number of different companies that, while in the same industry, do not necessarily trade in lockstep. However, it’s important to note that stocks like Nvidia comprise big portions of most semiconductor ETFs, so you can’t get rid of that volatility entirely. It’s also likely that of all the names in a semiconductor ETF, some will end up being long-term losers, which can drag down the returns of the overall fund.

In general, three risk categories apply to semiconductor ETFs:

Industry-specific risks: These apply to the industry as a whole. Owning different stocks in the industry can do little to diversify away this risk. If demand in the industry as a whole drops, such as during a recession, all semiconductor stocks will feel the pain, and an ETF won’t provide protection from that. The same is true if industry regulations that limit the profit-generating ability of semiconductor companies are put in place.
Market risks: Economic conditions that affect the overall stock market can also drag down semiconductors. When inflation and interest rates are rising, for example, the market as a whole tends to get negatively revalued, as those factors make it harder for companies to make money.
Company-specific issues: In addition to broad risks that can bring down an entire industry, problems that affect individual companies can also hurt the value of a semiconductor ETF. For example, bad management at a particular company can lead to earnings shortfalls, excessive debt loads, or other financial issues, all of which can drag down its stock price. Lawsuits are another potential issue that could hurt a stock.

Trends Shaping the Semiconductor Industry in 2025

Chip stocks boomed in 2023 and 2024 on the back of the AI revolution, but they’ve been dropped like the plague by investors in 2025. The tariffs announced by the Trump Administration have decimated big tech in general and semiconductors in particular, as chips and numerous related components are primarily manufactured in China. How exactly the tariffs play out, and what specific impact they have on earnings, remain huge unknowns, and uncertainty is bad for stock prices.

On the plus side, if the tariffs get resolved quickly and without too much damage to the chip companies, semiconductors ETFs could bounce back rapidly. However, there’s a high level of risk betting either for or against semis, so investors should tread lightly.

How To Buy Semiconductor ETFs

To actually purchase a semiconductor ETF, you’ll need to have, or at least open, an account at a brokerage firm. As ETFs trade on an exchange like a regular stock, they’re easy to buy and sell, and most firms these days won’t even charge you any commission to do so. Simply tell your broker which ETF you’d like to buy and the amount you wish to spend, and they’ll do the rest. If you prefer entering trades yourself, you can usually do so through your broker’s online trading platform.

Here are the steps you’ll need to take in a nutshell: