The semiconductor industry powers everything from smartphones to data centers to electric vehicles. For investors who want exposure to this critical sector, SOXX and SMH are the two dominant semiconductor ETFs. Both invest in chip companies, but they do it differently -- and those differences matter more than you might expect.
SOXX and SMH at a Glance
SOXX is the iShares Semiconductor ETF, managed by BlackRock. It tracks the ICE Semiconductor Index and holds approximately 30 stocks. SMH is the VanEck Semiconductor ETF, tracking the MVIS US Listed Semiconductor 25 Index with roughly 25 holdings.
Both charge an expense ratio of 0.35%, so cost is not a differentiator. The real differences lie in how they weight their holdings and how that affects performance and risk.
For a detailed side-by-side comparison, use the SOXX vs SMH comparison tool. For background on the sector, see our semiconductor ETFs guide.
Holdings and Weighting: The Key Difference
SMH is a market-cap-weighted fund with significant concentration in its largest holdings. NVIDIA alone can represent 20% or more of the fund, with Taiwan Semiconductor (TSMC) and Broadcom also holding outsized positions. The top five holdings in SMH often account for over 45% of the fund.
SOXX uses a modified equal-weight methodology that caps individual stock weights. While NVIDIA and other large companies are still the biggest positions, their weights are limited to around 8-10%. This produces a more balanced distribution across the semiconductor supply chain.
In practical terms: when NVIDIA has a great quarter, SMH benefits more. When NVIDIA disappoints, SMH suffers more. SOXX spreads its bets more evenly across chip designers, equipment makers, and foundries.
Performance Comparison
Over the past several years, SMH has outperformed SOXX during periods when mega-cap semiconductor stocks (particularly NVIDIA) have led the market. This is a direct result of SMH's heavier concentration in the largest names.
During periods of broader semiconductor strength -- when smaller chip companies and equipment makers participate in the rally -- SOXX tends to keep pace or even outperform. The performance gap between the two funds waxes and wanes depending on whether semiconductor leadership is broad or concentrated.
Neither fund consistently beats the other. Your view on whether mega-cap chip stocks will continue to dominate determines which fund is likely to perform better going forward.
Liquidity and Trading
SMH is the more liquid of the two, with significantly higher daily trading volume and tighter bid-ask spreads. This makes SMH the preferred choice for active traders and options strategies. SMH's options market is particularly deep, with tight spreads across many strike prices and expirations.
SOXX has solid liquidity by any normal standard -- it is just not quite as liquid as SMH. For buy-and-hold investors who trade infrequently, the liquidity difference is irrelevant. For day traders or options sellers, SMH has the edge.
Diversification Within the Sector
SOXX provides better diversification within the semiconductor space. Its modified weighting means smaller companies like Lattice Semiconductor, ON Semiconductor, and Microchip Technology carry meaningful weight. These companies offer exposure to different parts of the chip industry -- automotive, industrial, analog -- that might underperform during an AI-driven rally but outperform during a broader economic expansion.
SMH's concentration means your fate is more tied to a handful of companies. If you believe the biggest semiconductor companies will continue to dominate, this is a feature. If you want broader exposure to the entire chip supply chain, it is a drawback.
Risk Profile
Both funds are sector ETFs, which means they carry concentration risk by definition. Semiconductors are cyclical -- they boom during expansion and bust during downturns. Drawdowns of 30-40% are not unusual for either fund.
SMH's higher concentration adds single-stock risk on top of sector risk. If NVIDIA's growth disappoints or a competitor disrupts its dominance, SMH would be disproportionately affected. SOXX's more balanced approach provides some insulation against any single company's struggles.
For a diversified portfolio, most advisors suggest limiting sector bets to 5-15% of your total investments and using broad market ETFs as the core.
Which One Has Better Holdings?
Both funds hold the same universe of major semiconductor companies -- NVIDIA, AMD, Broadcom, TSMC, Intel, Qualcomm, Texas Instruments, and others. The question is not which companies they hold, but how much weight each company gets.
If you want a semiconductor fund that bets heavily on the winners, SMH's market-cap weighting rewards the largest, most successful companies with bigger positions. If you want a fund that gives smaller, potentially undervalued chip companies a fair shake, SOXX's approach is more egalitarian.
The Verdict: SOXX or SMH?
Choose SMH if: You want maximum exposure to mega-cap semiconductor leaders like NVIDIA and TSMC. You trade frequently or use options. You believe the biggest chip companies will continue to dominate the industry.
Choose SOXX if: You want more balanced diversification across the semiconductor supply chain. You prefer a fund where no single stock dominates your returns. You have a longer time horizon and value reduced single-stock risk.
Both are quality semiconductor ETFs from reputable providers. Explore both in detail on their ETF profile pages -- SOXX and SMH -- and compare them with our broader tech ETF coverage. Browse the full ETF directory for more sector options.
