The semiconductor industry is emerging as a key investment opportunity for tech enthusiasts, driven by growing demand for chips across industries. As Artificial Intelligence (AI), 5G, and cloud computing continue to surge, the need for semiconductors also rises in the market.

Given this landscape, investors might consider adding strong semiconductor ETFs SPDR S&P Semiconductor ETF (XSD), iShares Semiconductor ETF (SOXX), and VanEck Semiconductor ETF (SMH) in their portfolios for long-term growth.

In recent times, with geopolitical shifts, the government has been investing more in domestic semiconductor production, enhancing stability and reducing potential supply chain disruptions.

To lessen reliance on foreign manufacturers, create more job opportunities, and protect national security, the U.S. CHIPS and Science Act allocates $53 billion in funding to increase the semiconductor supply chain domestically.

Furthermore, the Semiconductor Industry Association (SIA) reported global sales of $53.1 billion in August, an increase of 3.5% more than in July 2024. As per Deloitte reports, the semiconductor industry can gain an advantage on key factors such as generative AI accelerator chips that can reach sales of $400 billion by 2027.

The global semiconductor market is expected to reach $980.80 trillion by 2029, exhibiting a CAGR of 10.1%. This trend has led to substantial growth potential in the chip industry.

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 seeks to invest in companies’ stocks operating across information technology, semiconductors and semiconductor equipment, and semiconductors sectors. The fund tracks the performance of the S&P Semiconductor Select Industry Index.

As of November 8, 2024, the fund had assets under management (AUM) of $1.40 billion and an NAV of $251.68. XSD has an expense ratio of 0.35%, lower than the category average of 0.58%.

The fund’s top holdings include Credo Technology Group Holding Ltd. (CRDO) with a 4.53% weighting, Rambus Inc. (RMBS) at 3.81%, and MACOM Technology Solutions Holdings, Inc. (MTSI), and Intel Corporation (INTC) at 3.77% and 3.67%, respectively. It currently has a total of 40 holdings.

The fund pays an annual dividend of $0.57, translating to a 0.23% yield at the prevailing price level. The fund’s four-year average yield is 0.27%. Its dividend payouts have grown at a 34.9% CAGR over the past three years.

Over the past month, the fund’s net outflow came in at $11.09 million. It has gained 39.5% over the past year to close its last trading session at $251.56.

XSD’s POWR Ratings reflect its promising prospects. The ETF has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It also has an A grade for Trade and a B for Buy & Hold. Of the 119 ETFs in the A-rated Technology Equities ETFs group, XSD is ranked #77. To access all of XSD’s POWR Ratings, click here.

ETF #2: iShares Semiconductor ETF (SOXX)

SOXX invests in stocks of companies operating across information technology, semiconductors, and semiconductor equipment sectors and tracks the NYSE Semiconductor Index. BlackRock Fund Advisors manages this fund.

With $1.48 billion in AUM, its top holdings are NVIDIA Corporation (NVDA) with a 9.86% weighting in the fund, Broadcom Inc. (AVGO) at 8.99% weight, followed by Advanced Micro Devices, Inc. (AMD), and Texas Instruments Incorporated (TXN) with 7.94% and 6.40% weightings, respectively. The ETF has a total of 30 holdings.

The ETF's expense ratio is 0.35%, compared to the category average of 0.58%. SOXX fund inflows were $2.06 billion over the past year and $1.38 billion over the past six months.

SOXX pays an annual dividend of $1.46, which translates to a 0.63% yield at the current price level. The fund’s dividend payouts have grown at an 11.4% CAGR over the past three years. Its four-year average yield is 0.84%.

Over the past year, SOXX has gained 45.2% to close the last trading session at $231.36. The fund’s NAV was $231.31 as of November 8, 2024.

SOXX’s solid fundamentals are reflected in its POWR Ratings. The fund has an overall rating of B, which translates to a Buy in our proprietary rating system.

The fund has a B grade for Trade and Buy & Hold. SOXX is ranked #75 in the same A-rated group. Click here to access all the SOXX ratings.

ETF #1:  VanEck Semiconductor ETF (SMH)

Van Eck Associates Corporation manages SMH. The fund invests in growth and value stocks of companies that are operating across the information technology, semiconductors, and semiconductor equipment sectors. It seeks to track the performance of the MVIS US Listed Semiconductor 25 Index.

As of November 8, SMH had $25.89 billion in assets under management and an NAV of $259.28. Its expense ratio of 0.35% compares to the category average of 0.58%.

The fund’s top holdings include NVDA with a 22.78% weight, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM) with a 13.11% weight, AVGO with a 7.89% weight, and AMD with a 4.47% weight. It has a total of 26 holdings.

SMH’s trailing-12-month dividend of $1.04 yields 0.40% on the current price level, while its four-year average dividend yield is 0.74%. Its dividend payouts have grown at an 11.6% CAGR over the past three years.

SMH has gained 71.3% over the past year and 30% over the past nine months to close the last trading session at $259.34. Its fund inflows came in at $8.07 billion over the past year and $2.55 billion over the past three months.

SMH’s promising outlook is reflected in its POWR Ratings. The ETF has an overall B rating, equating to a Buy in our proprietary rating system.

It has an A grade for Trade and a B for Buy & Hold. It is ranked #74 out of 119 ETFs in the same Technology Equities ETFs group. To see the POWR Ratings of SMH for Peer, click here.

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SMH shares were trading at $251.05 per share on Monday afternoon, down $8.29 (-3.20%). Year-to-date, SMH has gained 43.56%, versus a 26.80% rise in the benchmark S&P 500 index during the same period.

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