SMH ETF vs SOXX: AI Chip Exposure, Fees & Risks (2025)
Nervous when only NVIDIA rallies?
There is a way to capture AI-semiconductor upside while reducing single-stock dependence:
the VanEck Semiconductor ETF (SMH), a one-ticker basket of the AI chip ecosystem.
🎯 Quick Take
✅ Top-heavy by design—powerful in bull markets, but NVIDIA weight adds concentration risk.
✅ In practice, many compare or pair it with the more diversified SOXX.
• Expense ratio 0.35%; ~26 holdings; top 10 ≈ ~70% of assets (recent figures).
• Dividends are modest and typically paid annually (year-end); price appreciation is the main driver.
• Key risks: geopolitics, industry cycles, and single-name concentration.
🔥 Buzz → The “AI Dream Team” Portfolio
SMH’s appeal is its portfolio construction.
It compresses the core value chain: AI chip design (NVIDIA, AMD, Broadcom), manufacturing (TSMC), equipment (ASML, Lam Research, KLA, Applied Materials), and design automation (EDA: Synopsys, Cadence).
Recent weights (as of 2025-08-28): NVIDIA 21.9%, TSMC 10.6%, Broadcom 9.6%, AMD 6.0%, among a total of 26 names.
| Top Holding | Ticker | Weight (%) |
|---|---|---|
| NVIDIA | NVDA | 21.92 |
| Taiwan Semi (TSMC) | TSM | 10.62 |
| Broadcom | AVGO | 9.56 |
| AMD | AMD | 6.04 |
| Lam Research | LRCX | 4.40 |
| Analog Devices | ADI | 4.27 |
| ASML | ASML | 4.23 |
| Micron | MU | 4.11 |
| Texas Instruments | TXN | 4.00 |
| KLA | KLAC | 3.95 |
Summary: you hold the AI “brain” (design), the “hands & feet” (manufacturing & equipment), plus EDA—i.e., the AI chip dream team in one fund.
🧩 Business Model → Index Rules Drive Concentration
SMH tracks the MVIS US Listed Semiconductor 25 Index.
From US-listed (incl. ADR) semiconductor/equipment companies, it selects large, liquid names and weights them by modified market cap. This boosts large-cap weights—great for upside capture, but it also raises concentration risk.
💡 Glossary
• ADR: a depository receipt that lets non-US firms (e.g., TSMC, ASML) trade on US exchanges.
🌊 Industry Trend → Direct Beneficiary of the AI Cycle
Data-center and AI server build-outs spill into demand for HBM, advanced foundry nodes, and lithography/etch tools.
In practice, semiconductor ETFs often swing around AI-linked events (earnings, product launches), and options markets tend to price that in early.
For investors, the goal is to retain AI upside while diversifying event risk (earnings surprises, regulation) through a basket.
📊 Fund Metrics → Fees, Dividend, Number of Holdings
| Metric | SMH | Note |
|---|---|---|
| Expense Ratio | 0.35% | Similar to peers |
| Holdings | 26 | Top-heavy |
| Dividend (recent pattern) | Annual, year-end | ~0.3–0.4% TTM |
⚖️ SMH vs SOXX — What’s Different?
• Concentration: SMH overweights mega caps (NVDA, TSMC), giving stronger AI beta; SOXX holds ~30 names with broader spread.
• Universe: Both focus on US-listed semis (incl. ADRs), but index rules and constituents differ.
• Fees: SOXX ~0.34% vs SMH 0.35% (very close).
• Use case: Upside torque → SMH; volatility control/diversification → SOXX.
⚠️ Risks to Watch
👉 Geopolitics: Exposure to TSMC, ASML, and export-control sensitivities.
👉 Cycle: Semi cycles (inventory/demand/tooling) can amplify volatility.
❓ Frequently Asked Questions
A: 0.35%, similar to category peers.
``` Q: How often does it pay dividends?
A: Recent pattern is once a year (year-end). Yield is modest; the fund is more price-return oriented.
Q: Is the high NVIDIA weight a plus?
A: It boosts returns in rallies but can deepen drawdowns on negative surprises—investor preference matters.
Q: Can I hold SMH with SOXX?
A: Yes. Pairing SMH (concentrated) with SOXX (more diversified) can balance upside versus volatility.
*Personal view.*
As long as AI infrastructure spending persists, semis may remain a leadership group. Given frequent event volatility, phased entries and periodic rebalancing can be a practical risk-control approach.
In short, SMH is a convenient way to concentrate the “AI chip dream team.”
Costs are reasonable and the portfolio is clear—just keep single-name and cycle risks on your checklist.
