SMH, XLK Deliver Dramatic Returns in 2023

Technology and semiconductor ETFs have been generating a lot of buzz among investors and advisors this year. Considering the importance of technology to the global economy, especially as digitization and automation continue to ramp up, funds capturing the space are likely to see sustained interest from investors.

However, many investors are uncertain about which ETFs to invest in and how they should access these slices of the markets. Should they adopt a broad approach or opt for a more granular strategy? In this article, we will explore the performance and characteristics of key ETFs representing the semiconductor and technology categories, respectively, using advanced data analytics tools provided by LOGICLY.

SMH & XLK in Focus

The VanEck Semiconductor ETF (SMH) offers investors a way to track the performance of U.S.-listed businesses involved in the production of semiconductors. With an inception date of December 20, 2011, the fund has an established track record. The fund has a substantial $9.0 billion in AUM, making it the largest ETF to focus on the semiconductor industry. SMH also comes with an expense ratio of 0.35%, in the middle of the range for its peers.

The fund’s top holdings include NVIDIA Corporation (19.36%), Taiwan Semiconductor Manufacturing Co. (11.42%), Broadcom Inc. (5.28%), and ASML Holding NV ADR (5.05%). In all, the fund’s underlying index includes 25 securities.

The Technology Select Sector SPDR Fund (XLK), which launched on December 16, 1998, has a broader sector-wide focus and offers investors the opportunity to gain exposure to several tech powerhouses. The fund has $49.1 billion in AUM — it’s among the 50 largest U.S.-listed ETFs and ranks as the second-largest technology ETF.

XLK’s top holdings among the 66 securities in its portfolio include Apple Inc. (23.47%), Microsoft Corporation (23.12%), NVIDIA Corporation (4.70%), and Broadcom Inc. (4.31%). With a 0.10% expense ratio, the fund costs less than the majority of its peers.

10-Year Performance Comparison of the Funds

SMH and XLK 10-Year Performance

SMH and XLK 10-Year Performance based on data from LOGICLY.