6 Best Semiconductor ETFs to Buy in 2025 for Long-Term

Introduction:

The global semiconductor industry is more than just a high-tech playground for companies like Nvidia (NVDA), ASML Holding (ASML), and Taiwan Semiconductor Manufacturing Co. (TSMC). It's also at the heart of international power struggles, especially between the U.S. and China. While traditional factors like supply and demand, labor, and raw materials still matter, geopolitical decisions are playing an increasingly critical role in chip stock movements.

For instance, shares of leading chipmakers fell recently after a U.S. Commerce Department official suggested that export permissions for American chips used in Chinese factories would soon be revoked. This is just one example in a larger U.S.-China technology standoff, where semiconductors are a key battleground.

According to Nick Frasse, product manager at VanEck, “Geopolitical tensions and tariffs have made chip supply chains more complex, pushing companies to diversify and localize production."

Despite these risks, the long-term outlook for the semiconductor industry remains strong, driven by explosive growth in areas like artificial intelligence (AI), autonomous vehicles, and the Internet of Things (IoT). To mitigate the risk of picking the wrong stock, many investors are turning to semiconductor ETFs, which offer diversified exposure to the entire sector.

Summary

1. iShares Semiconductor ETF (SOXX)
2. VanEck Semiconductor ETF (SMH)
3. VanEck Fabless Semiconductor ETF (SMHX)
4. Invesco PHLX Semiconductor ETF (SOXQ)
5. SPDR S&P Semiconductor ETF (XSD)
6. Direxion Daily Semiconductor Bull 3x Shares (SOXL)

1. iShares Semiconductor ETF (SOXX)

Expense Ratio: 0.35% 
Best For: Beginners and long-term investors seeking broad exposure  

SOXX is one of the most popular and beginner-friendly semiconductor ETFs available. Managed by BlackRock, the fund passively tracks the NYSE Semiconductor Index, which includes the 30 largest U.S.-listed semiconductor companies. The portfolio is weighted by market capitalization with some adjustments to avoid overconcentration. This structure allows investors to gain exposure to industry giants like Nvidia, Intel, and Qualcomm, among others.

One of the standout features of SOXX is its exceptional liquidity. It trades over 7.8 billion shares on average every 30 days and has a very low bid-ask spread (0.01%), which means lower trading costs. The ETF has a long track record of performance and is a favorite among both retail and institutional investors. 

2. VanEck Semiconductor ETF (SMH)

Expense Ratio: 0.35%  

Best For: Investors seeking exposure to top U.S.-listed chipmakers  

The VanEck Semiconductor ETF (SMH) is currently the largest semiconductor ETF in the U.S. with more than $25 billion in assets under management. It tracks the MVIS US Listed Semiconductor 25 Index, which focuses on highly liquid semiconductor stocks that trade on U.S. exchanges. The ETF gives investors concentrated exposure to the biggest names in the chip industry, including Nvidia, Broadcom, AMD, and Intel.

While SMH shares 23 overlapping holdings with SOXX, its different indexing method can lead to slightly different weightings and performance outcomes. This ETF is often favored by investors who want strong exposure to the most dominant U.S.-listed semiconductor firms. 

3. VanEck Fabless Semiconductor ETF (SMHX)

Expense Ratio: 0.35%  

Best For: Investors who believe in the future of chip design over manufacturing  

SMHX is a thematic ETF focused exclusively on fabless semiconductor companies. Unlike traditional chipmakers that own and operate their own manufacturing plants, fabless firms specialize in designing chips while outsourcing production to third-party foundries like TSMC. This model allows these companies to remain agile, innovate faster, and maintain lower capital expenses.

The fabless model has produced some of the most successful names in tech—Nvidia, Qualcomm, and MediaTek, for example. By focusing on these companies, SMHX offers exposure to firms that prioritize intellectual property, R&D, and design innovation. 

4. Invesco PHLX Semiconductor ETF (SOXQ) 

Expense Ratio: 0.19%  

Best For: Cost-conscious investors looking for core semiconductor exposure  

SOXQ is Invesco's flagship semiconductor ETF and a cost-effective alternative to SOXX and SMH. With a low expense ratio of just 0.19%, it’s one of the most affordable ETFs in the semiconductor space. It tracks the PHLX Semiconductor Sector Index, which includes 30 large-cap U.S.-listed semiconductor stocks. These are the same companies you'll find in SOXX and SMH, offering near-identical exposure at a lower cost.

Despite being a newer entrant to the market, SOXQ has quickly gained traction among investors looking to maximize returns by minimizing fees. 

5. SPDR S&P Semiconductor ETF (XSD)

Expense Ratio: 0.35%  

Best For: Investors seeking exposure to small- and mid-cap chip stocks  

Unlike SOXX and SMH, which are market-cap weighted (giving larger companies more influence in the portfolio), XSD takes a unique equal-weighted approach. It tracks the S&P Semiconductor Select Industry Index, where each holding receives the same allocation regardless of its size. This results in greater exposure to smaller and lesser-known chip companies, balancing the dominance of giants like Nvidia and Intel.

6. Direxion Daily Semiconductor Bull 3x Shares (SOXL)

Expense Ratio: 0.75%  

Best For: Short-term traders and speculators seeking high returns  

SOXL is a leveraged ETF that aims to deliver three times the daily return of the NYSE Semiconductor Index. Using financial instruments like swaps and futures contracts, it amplifies daily market movements, making it a favorite among day traders and short-term momentum investors.

If the semiconductor sector rises by 1% in a day, SOXL aims to deliver a 3% gain. But the reverse is also true—if the sector drops by 1%, SOXL could lose 3%. Due to its daily reset mechanism, the compounding effect can lead to unpredictable results over longer periods. For this reason, SOXL is not suitable for long-term investing but can be highly effective for capturing short-term moves.

Frequently Asked Questions

Q1: What is a semiconductor ETF?
A1: A semiconductor ETF is an exchange-traded fund that invests in a basket of semiconductor-related companies, offering diversified exposure to the chip industry through a single investment.

Q2: Are semiconductor ETFs a good long-term investment?
A2: Yes, due to the increasing demand for chips in AI, cloud computing, IoT, and electric vehicles, semiconductor ETFs offer strong long-term growth potential.

Q3: What are the risks of investing in semiconductor ETFs?
A3: Risks include market volatility, geopolitical tensions (especially U.S.-China relations), supply chain disruptions, and technological obsolescence.

Q4: How do leveraged ETFs like SOXL and SOXS work?
A4: Leveraged ETFs aim to deliver amplified daily returns (or inverse returns) of an index using financial derivatives. They reset daily and are intended for short-term trading only.

Q5: Which semiconductor ETF is best for beginners?A5: The iShares Semiconductor ETF (SOXX) is considered beginner-friendly due to its high liquidity, broad exposure, and strong track record.

Conclusion

The semiconductor sector is at the forefront of global innovation—and geopolitical tension. As the world becomes more reliant on AI, automation, and smart technology, demand for chips will continue to rise. While individual semiconductor stocks can be risky due to market cycles and international politics, ETFs provide a smart way to diversify across the entire sector.

Whether you want stable exposure (like SOXX or SMH), focus on innovative chip designers (like SMHX), or short-term trading opportunities (like SOXL and SOXS), there's a semiconductor ETF tailored for your investment style in 2025.

Important Note: Please Read Before You Invest

We're just sharing some helpful tips, but remember, investing comes with risks. We can't promise that these tips will always work or that you'll make money. Everyone's financial situation is different, so it's smart to do your research or talk to a financial advisor before you invest. Using these tips, you agree that you're responsible for your investment decisions and results.