The VanEck Semiconductor ETF (SMH) is significantly outperforming the iShares Semiconductor ETF (SOXX) in 2024, raising questions about the reasons behind this divergence. Despite tracking similar indexes and using market cap-weighted technology, the VanEck ETF is up about 42%, while the iShares ETF has gained only 15%. The key difference lies in how each ETF weighs Nvidia, a leading AI company.
Yes, you read that headline right. There's something unique happening between two of the largest exchange-traded funds tracking U.S. semiconductor stocks: One fund is sharply underperforming the other, despite several recent years of relatively in-line performance. The VanEck Semiconductor ETF is up about 42% in 2024, while the iShares Semiconductor ETF has lagged with a gain of 15%.
fund follows 30. The former also allocates much larger weightings for its biggest names than the latter, according to Islam. That deviation in weighting affects broader performance when there are stocks such as Nvidia. The megacap tech leader and retail investor favorite has surged more than 175% this year, making it the top performer in the Dow Jones Industrial Average and the third-biggest gainer in the S & P 500 during that period.
ETF, Nvidia isn't even the largest holding. The stock has a smaller weighting than Broadcom despite its relative outperformance this year, Morningstar data shows. ETF has more holdings and has an average-weighted market cap that is a lot smaller, so it can offer more diversified exposure to the sector.
ETF Semiconductor Nvidia AI Performance
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