10 Best Semiconductor ETFs
In this article, we discuss 10 best semiconductor ETFs. If you want to skip our discussion on the semiconductor industry, head over to 5 Best Semiconductor ETFs.
In 2023, the semiconductor industry faced numerous challenges, including inflation, geopolitical uncertainties, supply chain disruptions, and decreased demand in PC and mobile device markets, leading to an 8.2% global revenue decline compared to the previous year. However, despite some persistent challenges, the industry's overall outlook for 2024 is positive, with expectations of double-digit revenue growth. KPMG's annual survey gathered insights from 172 semiconductor executives globally. Despite the revenue contraction in 2023, 83% of respondents anticipate increased revenue growth for their companies in 2024. Additionally, 85% believe the industry as a whole will experience growth, a significant increase from the previous year's survey.
Several positive factors are expected to drive growth in 2024, including trends in generative artificial intelligence (Gen AI), cloud computing, increased semiconductor usage in automobiles, and expanding aerospace and defense budgets, which could mitigate broader economic and geopolitical risks. While 30% of semiconductor leaders perceive an excess of inventory, up from 24% last year, 19% anticipate increasing demand due to AI and emerging technologies, double the 2023 figure. Overall, 2024 is viewed as the start of another cyclical upswing for the semiconductor industry.
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Deloitte reported that the semiconductor industry in 2023 faced its seventh downturn since 1990. However, projections for 2024 suggest a recovery, with global sales forecasted to reach $588 billion, marking a 13% improvement over 2023 and a 2.5% increase from the record revenues of $574 billion in 2022. The memory chip market played a significant role in the industry's performance last year, experiencing a sharp decline of around 31%, or approximately $40 billion. However, it is expected to rebound in 2024, approaching 2022 levels. Excluding memory, the rest of the industry saw a more moderate decline of about 3% in 2023. In terms of end markets, both PC and smartphone sales are projected to grow by 4% in 2024, following declines of 14% and 3.5%, respectively, in 2023. The recovery of these key markets is crucial for the semiconductor industry, as communication and computer chip sales, including data center chips, accounted for 56% of total semiconductor sales in 2022. However, inventory levels remained high at over $60 billion in fall 2023, posing a challenge for sales in the first half of 2024 as efforts to reduce inventory continue. Additionally, fab utilization, which reached levels around the mid-90% range during the recent shortage, is expected to decline below 70% in Q4 2023. Higher utilization rates are necessary for industry profitability, suggesting a prolonged recovery period may be required.
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Heading into 2024, the semiconductor industry is poised for a notable recovery following the challenges of Q3 2023. Analysts at International Data Corporation (IDC) foresee a considerable growth opportunity in 2024. This optimistic outlook marks a welcome departure from the recent fluctuations and is fueled by several key trends. Firstly, the demand for AI chips continues to rise steadily. These chips play a critical role in powering a diverse range of advanced technologies and services. As AI integration expands across different sectors, including big data and smart devices, there is potential for a significant surge in demand for these chips. Secondly, the smartphone market is experiencing a resurgence, partly due to advancements such as 5G and new AI capabilities. This revitalization represents a significant boost for the semiconductor industry, as smartphones remain major consumers of semiconductor chips. Lastly, the automotive sector is increasingly reliant on semiconductor technology. Advancements in Advanced Driver Assistance Systems (ADAS) and enhanced infotainment systems are making cars more technology-driven. This transformation is generating substantial demand for automotive semiconductors.
Some of the best semiconductor stocks to buy include ASML Holding N.V. (NASDAQ:ASML), NVIDIA Corporation (NASDAQ:NVDA), and Intel Corporation (NASDAQ:INTC). However, this article includes the best semiconductor ETFs to buy, which also expose investors to top stocks in the industry.
Our Methodology
We curated our list of the best semiconductor ETFs by choosing consensus picks from multiple credible websites. We have mentioned the 5-year share price performance of each ETF as of March 13, 2024, ranking the list in ascending order of the share price. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company's production equipment.
Best Semiconductor ETFs
10. Xtrackers Semiconductor Select Equity ETF (NASDAQ:CHPS)
5-year Share Price Performance as of March 13: 53.20%
Xtrackers Semiconductor Select Equity ETF (NASDAQ:CHPS) aims to mirror the performance of the Solactive Semiconductor ESG Screened Index, with net assets totaling $6.65 million as of March 12, 2024. It offers a net expense ratio of 0.15%. Xtrackers Semiconductor Select Equity ETF (NASDAQ:CHPS) is one of the best semiconductor ETFs to buy.
NVIDIA Corporation (NASDAQ:NVDA) is the largest holding of Xtrackers Semiconductor Select Equity ETF (NASDAQ:CHPS). On February 21, NVIDIA Corporation (NASDAQ:NVDA) reported a Q4 non-GAAP EPS of $5.16 and a revenue of $22.1 billion, outperforming Wall Street estimates by $0.52 and $1.55 billion, respectively.
According to Insider Monkey’s fourth quarter database, 173 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA), compared to 180 funds in the prior quarter. Rajiv Jain’s GQG Partners is a prominent stakeholder of the company, with 13.90 million shares worth $6.8 billion.
SaltLight Capital stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its fourth quarter 2023 investor letter:
“We were fortunate to have some exposure to some of the ‘Magnificent Seven’ – Amazon, NVIDIA Corporation (NASDAQ:NVDA), Meta Platforms and Google (although in aggregate, we still hold a smaller weighting than the S&P 500).
While we are cautious in AI infrastructure, we do think there are mispriced opportunities in areas of application software where AI can be infused to make a step change improvement. Posted in our office is this chart that ASML provides at each of its investor days. This chart is a little outdated from 2021, but we think illustrates how value (in operating profit) was distributed across semiconductors, hardware, and then software & services. It’s very clear that most of the economic value in the past has accrued to the software services (in gray) built on the backs of highly technical companies run by extremely smart people.
Why is this? We think it is due to a combination of distribution and network effects. Our working hypothesis right now is that this will likely remain a similar outcome in the AI epoch. One outlier right now is Nvidia which is capturing 80% margins..” (Click here to read the full text)
9. Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ)
5-year Share Price Performance as of March 13: 55.80%
Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) is linked to the PHLX Semiconductor Sector Index, aiming to invest at least 90% of its assets in index securities. The index represents the 30 largest US-listed semiconductor companies, covering products like memory chips, microprocessors, and integrated circuits. Launched on June 11, 2021, Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) bears an expense ratio of 0.19% as of March 12, 2024. It is one of the best semiconductor ETFs.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the largest holdings of Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ). On February 1, Advanced Micro Devices, Inc. (NASDAQ:AMD) increased its AI-related revenue guidance to $3.5 billion for this year, up from $2 billion. Analysts believe Advanced Micro Devices, Inc. (NASDAQ:AMD) may still be underestimating intentionally. CEO Dr. Lisa Su expressed confidence in surpassing this figure. Analysts predict even higher revenue, estimating $5 billion this year and $8 billion next year from the MI300.
According to Insider Monkey’s fourth quarter database, 120 hedge funds were bullish on Advanced Micro Devices, Inc. (NASDAQ:AMD), compared to 110 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 28.3 million shares worth $4.17 billion.
In addition to ASML Holding N.V. (NASDAQ:ASML), NVIDIA Corporation (NASDAQ:NVDA), and Intel Corporation (NASDAQ:INTC), Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the best semiconductor plays.
Jackson Peak Capital stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“On the long side of the portfolio, a core theme we remain invested behind is the data center infrastructure buildout and AI chips arms race that we’ve discussed since our first letter in Q2. Some skepticism has crept into the market, and it’s understandable given the huge ramp in 2023. However, our research continues to suggest 2023 was the start of a multi-year platform shift. Value will accrue to varying segments of the AI value chain at different parts of the cycle. We continue to see value in the “boots on the ground” winners in the data center buildout (Vertiv, Modine Manufacturing, Celestica). Our positioning in AI semiconductor companies (NVDA and Advanced Micro Devices, Inc. (NASDAQ:AMD)) has ebbed and flowed given we are cognizant (perhaps too much so) that these names are crowded positions across investor style types. We’ve done well in these chip stocks since inception and NVDA is currently a long, and we’re trying to “let winners run” while using sizing to risk manage these names due to the market-wide positioning bias in semiconductors.”
8. Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI)
5-year Share Price Performance as of March 13: 70.67%
Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI) primarily invests at least 80% of its assets in semiconductor, semiconductor equipment, and related technology companies, regardless of their size. It may include small and mid-cap companies and is considered non-diversified. Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI)’s portfolio consists of 36 stocks and its net expense ratio is 0.75% as of March 1, 2024. Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI) is one of the best semiconductor ETFs to buy.
Lam Research Corporation (NASDAQ:LRCX) is the largest holding of Columbia Seligman Semiconductor & Technology ETF (NYSE:SEMI). Lam Research Corporation (NASDAQ:LRCX) manufactures semiconductor processing equipment used in integrated circuit fabrication. On February 8, Lam Research Corporation (NASDAQ:LRCX) declared a $2.00 per share quarterly dividend, in line with previous. The dividend is payable on April 3, to shareholders on record as of March 13.
According to Insider Monkey’s fourth quarter database, 67 hedge funds were bullish on Lam Research Corporation (NASDAQ:LRCX), compared to 74 funds in the last quarter.
Baron Opportunity Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its fourth quarter 2023 investor letter:
“Lam Research Corporation (NASDAQ:LRCX) is a leading global supplier of wafer fabrication equipment (WFE) and services to the semiconductor industry. Lam’s products tend to focus on etch and deposition process steps and its tools are critical in the production of NAND and DRAM memory chips as well as logic devices. While the share of overall WFE spending looks relatively fragmented across the top four to five players in the industry, each of these leading companies tends to have significant share within smaller slices of the industry, creating a stable and favorable industry structure, with share shifts tending to only happen at times of technology transition in the broader industry. We purchased shares of Lam in the quarter as we believe we are at one of those key transition points in the industry that will disproportionately benefit Lam, with a move to gate-all-around transistors in logic creating an increasing need for complex deposition and etch process stops and the emergence of high-bandwidth memory and advanced packaging requiring increasingly complex high-aspect-ratio (i.e., very deep) etches, where Lam has virtually 100% market share. We also believe the market is underestimating the pent-up earnings power in the company as NAND WFE spending recovers in the coming years from one of its worst down cycles ever in 2023.”
7. Strive U.S. Semiconductor ETF (NYSE:SHOC)
5-year Share Price Performance as of March 13: 95.09%
Strive U.S. Semiconductor ETF (NYSE:SHOC) is one of the best semiconductor ETFs to buy. Strive U.S. Semiconductor ETF (NYSE:SHOC) is a passively managed ETF that aims to provide broad exposure to the US semiconductor sector. It offers concentrated exposure to this sector through a cost-efficient index product. The ETF was established on October 6, 2022, with net assets totaling $61.34 million as of March 12, 2024, and an expense ratio of 0.40%.
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the top holdings of Strive U.S. Semiconductor ETF (NYSE:SHOC). Analyst Kevin Cassidy predicts that Qualcomm Snapdragon's system-on-a-chip will dominate the market in the upcoming computing platform generation by facilitating the integration of generative AI at the edge. He maintained a Buy rating and raised the price target on QUALCOMM Incorporated (NASDAQ:QCOM) from $170 to $200 on March 11.
According to Insider Monkey’s fourth quarter database, 78 hedge funds were long QUALCOMM Incorporated (NASDAQ:QCOM), compared to 67 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a prominent stakeholder of the company, with nearly 3 million shares worth $431.5 million.
Madison Sustainable Equity Fund stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its fourth quarter 2023 investor letter:
“QUALCOMM Incorporated (NASDAQ:QCOM) also reported a solid fourth fiscal quarter with better than expected results. The company guided the first quarter ahead of expectations despite headwinds from Samsung as the inventory headwinds dissipate. Qualcomm remains well positioned in the mobile handset market and should benefit as Artificial Intelligence moves to edge devices which could drive an upgrade cycle.”
6. First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL)
5-year Share Price Performance as of March 13: 187.17%
First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL) ranks 6th on our list of the best semiconductor ETFs. First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL) was launched on September 20, 2016, with an investment objective to mirror the performance of the Nasdaq US Smart Semiconductor Index. The ETF has an expense ratio of 0.60% and holds a portfolio consisting of 32 stocks.
First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL)’s top holdings include Broadcom Inc. (NASDAQ:AVGO). Broadcom Inc. (NASDAQ:AVGO) aims to increase revenue in 2024 by leveraging its networking and artificial intelligence offerings. Analysts are optimistic about the company's fiscal year 2024 guidance. Mizuho reiterated a Buy rating on Broadcom and raised the price target from $1,550 to $1,625 on March 8.
According to Insider Monkey’s fourth quarter database, 91 hedge funds were long Broadcom Inc. (NASDAQ:AVGO), compared to 87 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company.
In addition to ASML Holding N.V. (NASDAQ:ASML), NVIDIA Corporation (NASDAQ:NVDA), and Intel Corporation (NASDAQ:INTC), hedge funds are piling into Broadcom Inc. (NASDAQ:AVGO) for exposure to the semiconductor industry.
Carillon Eagle Growth & Income Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its fourth quarter 2023 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) traded higher after closing on its acquisition of VMware. The company also announced earnings that were relatively in line with estimates with some benefit of better operating expenses. The stock appears to be one of the first real beneficiaries of generative artificial intelligence (AI) with meaningful revenue expected to show up in 2024.”
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Disclosure: None. 10 Best Semiconductor ETFs is originally published on Insider Monkey.
