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Riding high on favorable legislation (the CHIPS and Science Act) and strong demand for faster and more efficient AI chips, the semiconductor industry has outperformed the broader market by a wide margin — a year-to-date gain of about 30% for the Dow Jones U.S. Semiconductors Index compared to about 2% for the Dow Jones Industrial Average.
Leading the pack is NVIDIA with an eye-watering 90% year-to-date gain, followed by rival chipmaker AMD’s nearly 60% YTD return. Both chipmakers are among the top S&P 500 performers for 2023, with AMD taking fifth place and NVIDIA taking first.
NVIDIA is a growth stock and can go through wild price swings in the short term. But if you don’t have the risk appetite for individual stocks, you can also invest in semiconductor exchange-traded funds or ETFs. These ETFs expose investors to numerous parts of the semiconductor industry and can pad one stock’s downside with another’s gains.
Top 5 Semiconductor ETFs with NVIDIA
1. ProShares Ultra Semiconductors (USD)
Description: The USD is a leveraged ETF — it will use debt and non-stock investments to boost the fund’s overall returns. The fund aims to amplify returns twice that of the Dow Jones U.S. Semiconductors Index. The rewards can be sweet but approach it cautiously — because it leverages debt, you can lose more than your initial investment. If you’re going to trade in leveraged ETFs, it’s essential to know what you’re getting into. (Learn more about leveraged ETFs.)
Top 5 semiconductor stocks (as of March 21):
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Texas Instruments: 4.89%.
Year-to-date performance: around 75%.
65-day average trade volume: about 141,000.
2. VanEck Semiconductor (SMH)
Description: The SMH contains the top 25 semiconductor companies worldwide.
Top 5 semiconductor stocks:
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Taiwan Semiconductor Manufacturing: 11.67%.
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Texas Instruments: 4.95%.
Year-to-date performance: around 24%.
65-day average trade volume: about 3.8 million.
3. iShares Semiconductor (SOXX)
Description: This is your bread-and-butter ETF for semiconductors. The fund contains the 30 largest chip makers in the U.S. and manages $7.34 billion in assets.
Top 5 semiconductor stocks (as of March 21):
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Texas Instruments: 7.90%.
Year-to-date performance: around 23%.
65-day average trade volume: about 1 million.
4. Direxion Daily Semiconductor Bull 3X Shares (SOXL)
Description: SOXL is a leveraged inverse ETF — it seeks to outperform a semiconductor index rather than passively follow it. In this case, the fund’s goal is to triple the performance of the ICE semiconductor index for a single day. But the fund can also compound your losses and will likely underperform passive semiconductor ETFs over long periods. This isn’t an ETF for long-term investors but for traders who want to take a one-day risk at amplifying returns. Like the USD ProShares Ultra Semiconductors ETF, this is for experienced traders only.
Top 5 semiconductor stocks (as of March 20):
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Texas Instruments: 5.67%.
Year-to-date performance: around 70%.
65-day average trade volume: about 91 million.
5. Invesco Dynamic Semiconductors (PSI)
Description: This ETF is passively managed and contains 32 U.S. semiconductor companies. The fund also pays out a modest dividend with a current yield of 0.40%.
Top 5 semiconductor stocks (as of March 20):
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Applied Materials: 5.14%.
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Texas Instruments: 4.97%.
Year-to-date performance: around 20%.
65-day average trade volume: around 26,000.
The author owned shares in NVIDIA at the time of publication.
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