Best ETF to Buy: VanEck Semiconductor ETF vs. iShares Semiconductor ETF
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Semiconductor stocks have been soaring, led by Nvidia. But that's been far from the only winner -- other popular names like Taiwan Semiconductor, Advanced Micro Devices, and Broadcom have all surged since the start of 2023, shortly after ChatGPT was launched.
If you want exposure to a group of stocks, a smart way to do so is through an exchange-traded fund (ETF). These funds trade like stocks but hold a range of companies instead of just one. An ETF is the easiest way to quickly diversify your holdings across a sector like semiconductors.
The two largest semiconductor ETFs are the VanEck Semiconductor ETF (NASDAQ: SMH) and the iShares Semiconductor ETF (NASDAQ: SOXX). Let's compare the two to see which one is the better option.
A choice of two types of semiconductor ETFs
You might think the composition of these two ETFs would be the same, but that's not the case. Unlike rival index funds, which have similar compositions due to tracking the same underlying index, these two ETFs are based on different indexes.
The VanEck Semiconductor ETF tracks the MVIS US Listed Semiconductor 25 Index, while the iShares version follows the NYSE Semiconductor Index.
As a result, there are significant differences between their five biggest holdings, as you can see from this chart.
| VanEck ETF | iShares ETF |
|---|---|
| Nvidia:19.5% | Broadcom: 8.7% |
| Taiwan Semiconductor: 12.5% | Advanced Micro Devices: 8.7% |
| Broadcom: 8.1% | Nvidia: 8% |
| Texas Instruments: 5.1% | Qualcomm: 6.2% |
| Advanced Micro Devices: 4.9% | Texas Instruments: 6.1% |
Source: company websites. Data as of 9/20/24.
The VanEck ETF has more than double the exposure to Nvidia that the iShares ETF does. Importantly, the iShares ETF doesn't own foreign stocks, such as Taiwan Semiconductor (TSMC) and the Netherlands-based ASML, two of the top semiconductor stocks. Arguably, that gives the VanEck ETF an advantage. While TSMC is the second-largest holding in the VanEck fund, ASML is the sixth-largest.
The VanEck ETF holds 26 stocks, while the iShares ETF owns 30.
The performance comparison
Based on the chart above, it probably won't surprise you that the VanEck Semiconductor ETF has outperformed the iShares Semiconductor ETF recently since it has greater exposure to Nvidia.
In the 10 years before the start of the generative AI boom at the beginning of 2023, the iShares ETF outperformed the VanEck, as you can see from the chart below.
But since then, the VanEck ETF has dominated, dating back to 2013.
Since the beginning of 2023, the difference between the two funds is even clearer.
Based on recent performance, it seems like the VanEck ETF has the edge here.