Top-Performing Semiconductor ETFs for a Diverse Portfolio in 2024

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In the wake of favorable legislation, including the CHIPS and Science Act, coupled with a surging demand for advanced AI chips, the semiconductor industry outpaced the broader market in 2023. For investors seeking exposure without the risk associated with individual stocks like NVIDIA, semiconductor exchange-traded funds (ETFs) offer a strategic alternative. Here’s a breakdown of the best-performing semiconductor ETFs for January 2024.

Semiconductor Industry Overview

Riding high on legislative support and the demand for AI chips, the semiconductor industry demonstrated exceptional performance in 2023. Notably, NVIDIA (NVDA) emerged as a frontrunner, achieving a remarkable one-year gain of over 200%, securing its position among the top performers in the S&P 500 for the year.

Diversifying Risk with Semiconductor ETFs

Given the potential volatility of individual semiconductor stocks, investing in semiconductor ETFs provides a diversified approach. These ETFs expose investors to various facets of the semiconductor industry, mitigating the downside of one stock with the gains of another.

Top 7 Semiconductor ETFs by One-Year Performance

  1. VanEck Semiconductor ETF (SMH): 72.69% one-year return
  2. iShares Semiconductor ETF (SOXX): 66.96% one-year return
  3. Invesco PHLX Semiconductor ETF (SOXQ): 66.31% one-year return
  4. First Trust Nasdaq Semiconductor ETF (FTXL): 54.06% one-year return
  5. Invesco Semiconductors ETF (PSI): 48.77% one-year return
  6. Columbia Seligman Semiconductor and Technology ETF (SEMI): 44.86% one-year return
  7. SPDR S&P Semiconductor ETF (XSD): 35.15% one-year return

(Source: VettaFi, data as of January 2, 2024, for informational purposes only; excludes leveraged and single-stock ETFs)

Types of Semiconductor ETFs

Understanding the variety of semiconductor ETFs is crucial for investors. Thematic ETFs, like the ones listed above, offer exposure to semiconductor index funds and are suitable for long-term investing. In addition to these, there are single-stock ETFs and leveraged ETFs.

  • Single-stock ETFs: Examples include the GraniteShares 1.5x Long NVDA Daily ETF (NVDL), providing returns based on the daily performance of individual semiconductor stocks. These are often used for high-risk, short-term speculation.
  • Leveraged ETFs: Illustrated by the Direxion Daily Semiconductor Bull 3x Shares (SOXL), these aim to deliver returns based on multiples of the daily performance of an entire index, suitable for speculative trading.

Investing in Semiconductor ETFs

To invest in semiconductor ETFs, acquiring an investment account, such as a brokerage account or an individual retirement account (IRA), is essential. The choice between thematic, single-stock, or leveraged ETFs depends on the investor’s risk tolerance and investment horizon. Thematic semiconductor ETFs are a less volatile option for those aiming for long-term growth.

For more information on how to start investing in ETFs, explore our guide on investing in ETFs.

[Investment Disclaimer: The provided information is for educational purposes only. Readers are advised to conduct thorough research and seek professional advice before making investment decisions.]

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