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Investment in Focus: VanEck Semiconductor ETF (SMH)

  • Writer: Triplet 59
    Triplet 59
  • Sep 23
  • 6 min read

Semiconductors are the hidden engines powering much of what we use daily — smartphones, cloud servers, artificial intelligence, electric vehicles. When demand for AI, data centres, high-performance computing surges, those engines roar to life. SMH (VanEck Semiconductor ETF) is a way for investors to ride that roar. It’s not a whisper in tech; it’s a full-throated shout.


Launched in late 2011, SMH has etched its name as a go-to ETF for exposure to the major U.S. listed semiconductor companies, and semiconductor equipment producers. When chips are top of mind (and in today’s tech climate they are), SMH often sits center stage. But with the opportunity comes risk, concentration, and volatility. For long term investors, understanding SMH is a story of timing, conviction, and balancing exposure.


Origins & What SMH Seeks to Provide

  • Inception & Issuer: SMH was launched on December 20, 2011 by VanEck.

  • Index Tracked: It seeks to replicate the MVIS US Listed Semiconductor 25 Index (MVSMHTR). That index includes U.S.-listed semiconductor firms—both chipmakers and equipment makers with high liquidity.

  • Objective: Provide exposure to the performance of the semiconductor segment of the tech sector — a high growth, high innovation segment. Not seeking to beat, but to mirror the index before fees.

Feature

Details

Expense Ratio

0.35% net.

Number of Holdings

~ 26 major companies.

Weighted Average Market Cap

Very large. The average is over USD 1.2-1.3 trillion for top holdings.

Valuation Metrics

P/E (trailing / forward) relatively elevated (e.g. ~36× in recent data), P/B ~6.6.

NAV 52-Week Range

Approximately US$179.75 to ≈ US$302.02 in the past 12 months.

Net Assets / AUM

~ US$30-32 billion, making SMH one of the larger semiconductor ETFs.

Top Holdings & Sector Exposure

SMH’s top holdings are heavily skewed toward a few mega-players. As of late 2025:

  • Top Holdings:

    1. NVIDIA (NVDA): ~ 20-22% of assets.

    2. Taiwan Semiconductor Manufacturing Co (TSM): ~ 10-12%

    3. Broadcom (AVGO), Advanced Micro Devices (AMD), ASML, Texas Instruments (TXN) etc., rounding out the top 10 which collectively account for ~ 70-75% of the total net assets.

  • Sector Composition: All exposure is to semiconductor & equipment — no diversification into other technology sectors like software, internet, services, health, etc., unless those companies also manufacture chips/equipment. Means both high upside in a semiconductor boom, high downside in bust.


Performance Highlights

SMH has had strong performance in recent years, driven by demand for AI, cloud, data infrastructure, etc. Key return numbers:

Time Period

Approx. Annualised Return

1 Year / YTD

Very strong; YTD returns around 30-35% in recent periods.

3-5 Years

Strong growth: multi-year returns significantly above broad markets when semis are in a growth cycle.

Since Inception

Also strong; compounded annualised returns for investors since 2011 have been impressive during periods of semis strength.

But performance comes with volatility. When semiconductor stocks slip (due to supply chain issues, geopolitical risk, regulation, over-capacity, changes in demand), SMH tends to suffer more than broader tech, and certainly more than diversified equity indices.

AI motherboard

Strategy, Strengths & Risks

Strengths:

  • Very strong thematic exposure: if you believe in growth of AI, computing infrastructure, 5G, edge computing, semiconductors are central; SMH gives you access.

  • High liquidity, strong market presence — you can trade it readily.

  • Exposure to industry leaders and equipment makers, not just chip producers: gives a broader capture of the semiconductor supply chain.

  • Transparent index strategy; rules are known; no hidden active bets.


Risks:

  • Concentration Risk: A few companies (NVDA, TSM etc.) dominate. If one or more underperform, the impact on SMH is large.

  • Volatility: Semiconductor industry is cyclical. Demand swings, supply chain disruptions, changes in capital expenditure, trade wars, regulatory risks all affect it.

  • Valuation Risk: Given growth expectations baked in, high P/E multiples can make downside more painful if growth disappoints.

  • External Risks: Geopolitical issues (Taiwan, China, export controls), component shortages, tariff risks, energy cost fluctuations, regulatory oversight.

  • Sector Specific Risks: Technological change can make some firms obsolete; R&D risk; competition risk; margin compression.


Where SMH Fits in a Portfolio

SMH is not likely a “core” holding for very conservative portfolios, but it has roles in many portfolios, depending on objectives:

  • Growth/Tech-tilt Portfolios: SMH can serve as a way to overweight semis when tech growth is a central view.

  • Thematic Investors: For those bullish on AI, edge computing, machine learning, cloud infrastructure — SMH is a direct way to capture that theme.

  • Balanced Portfolios (Small Allocation): A moderate chunk (say 5-10%) in growth portfolios; smaller in balanced ones to avoid overexposure but capture upside.

  • Active Rebalancing Needed: Because semiconductors can boom + bust; prudent rebalancing helps.


Verī Platform & What We Do

At Verī, our mission is to provide access to the entire universe of investments — from income-to-accumulation, passive to active, low-risk to high-risk, across all asset types, currencies, and regions.

With SMH and similar thematic / sector ETFs, Verī is demonstrating samples of what can be accessed. This is not an endorsement, promotion, or marketing of SMH or any one investment.


What we help with:

  1. Comparative Analysis: Show how SMH stacks up versus broader tech/semiconductor peers, how volatile it has been, how its returns behave in different cycles.

  2. Risk vs Return Scenarios: Visualisation of how SMH might perform in downturns, or during periods of supply constraints, or shifts in technology demand.

  3. Valuation Metrics & Trend Monitoring: P/E, P/B, trend-strength, leadership of top holdings; watching input costs and macro factors that feed into semis.

  4. Portfolio Fit Tools: Illustrating what % allocation in SMH makes sense depending on your risk profile (e.g. aggressive vs balanced), how it interacts with other holdings, and likely drawdowns.

  5. Liquidity, Cost, Tax & Geographic Exposure: Helping you understand exposure to foreign firms listed in U.S., currency risks, tax implications, and the cost of holding such sector-concentrated exposures.


SMH in the Model Portfolio Solution (MPS)

Within the MPS framework, SMH plays a very specific role — targeted sector exposure. It is not a core holding like a global equity index or a diversified large-cap ETF, but rather a high-beta satellite allocation for portfolios seeking growth from innovation themes.

  • Growth Portfolios:SMH can be used as a sector overweight in portfolios where clients want explicit exposure to AI, data centres, and advanced technology infrastructure. Allocations typically sit between 5–15% of the equity sleeve, depending on conviction and risk appetite.

  • Balanced Portfolios:A smaller allocation (2–5%) can provide exposure to the semiconductor growth story without overwhelming portfolio stability. SMH here acts as a kicker, complementing broader, more diversified tech exposure.

  • Aggressive / Thematic Portfolios:For clients specifically seeking innovation or thematic baskets, SMH may be grouped with other technology, AI, or digitalisation ETFs as part of a concentrated growth strategy. Here, SMH’s volatility is embraced as part of a high-reward theme.

  • Rebalancing Dynamics:Because semiconductors are highly cyclical, SMH allocations require active monitoring and regular rebalancing. Gains can be rapid in up-cycles, but equally, sharp drawdowns can erode value if positions aren’t reviewed. MPS ensures portfolios stay aligned to agreed risk tolerances.

  • Diversification Role:SMH is best held alongside diversified assets (broad market equity ETFs, fixed income, alternatives). It adds precision exposure but is not suitable as a standalone long-term equity core due to sector concentration.


Narrative Snapshot

Think of semiconductors as the oxygen for modern tech. When AI, big data, cloud, edge devices demand more chips, the sector breathes deeply. SMH is like riding on that breath — capturing both the power and the vulnerability of dependency on chips.


In recent years, Nvidia has become almost emblematic of this sector’s potential: its success is a lens through which many investors view SMH. But that also means SMH entrusts a lot to Nvidia’s continuing innovation, regulatory navigation, and competitive position. TSM is another pillar: manufacturing strength and capacity.


If the industry grows steadily, SMH rewards. But when cycles shift — when demand slows, oversupply looms, or macro headwinds arrive — SMH can feel that sharply. For investors who know the sector well, believe in long-term tailwinds (AI, cloud, innovation), it offers upside. But it is not without risk and it's not for everyone.


Disclaimer

This article is provided for informational purposes only. It is not intended as investment advice, financial advice, or a recommendation to buy, sell, or hold any security, fund, or other financial instrument. The information reflects publicly available data and analysis at the time of writing and may change without notice.


Verī Platform does not provide personal investment recommendations. Investors should carefully consider their own objectives, risk tolerance, and financial circumstances before making any investment decisions. Where necessary, seek independent advice from a licensed financial adviser.


Past performance is not indicative of future results. All investments involve risk, including the potential loss of capital.

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