By Ryne Mauck
Publication Date: 2026-09-24 21:01:00
One rival semiconductor ETF has quietly lapped the most popular chip fund on the market over the past year, and the reason comes down to a single position that most investors never think to question.
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If you own the VanEck Semiconductor ETF (NASDAQ:SMH), you own the default way to bet on chips. The fund is the largest and most liquid semiconductor ETF on the market, sitting at roughly $71.1 billion in assets with a slim 0.35% expense ratio, and it delivers exactly what most investors want: concentrated exposure to the names driving the AI buildout. That is also SMH’s problem. NVIDIA (NASDAQ:NVDA | NVDA Price Prediction) now accounts for 21.7% of the portfolio, and over the past year an equal-weight-leaning competitor has quietly outrun it by more than 20 percentage points.
Why SMH’s Design Became a Headwind
SMH holds only about 25 stocks and weights them by modified market cap, which pushes megacap winners to the top and keeps them there. Beyond Nvidia, the fund’s next tier includes Taiwan Semiconductor at 9.29%, Applied Materials at 5.74%, AMD at 5.63%, and Micron at 5.67%. The top ten holdings account for the majority of the fund’s assets.
That structure worked brilliantly when Nvidia was compounding at triple-digit rates, but it has worked less well over the past twelve months. Nvidia returned 26.55% in the year ending…