The global semiconductor industry remains at the center of the investment cycle surrounding artificial intelligence, data centers and advanced computing. Against that backdrop, the VanEck Semiconductor ETF (SMH) offers concentrated exposure to major chipmakers and equipment suppliers, linking its performance to both structural AI demand and the cyclical nature of semiconductor markets.

A Concentrated Semiconductor Portfolio

SMH seeks to replicate the price and yield performance of the MVIS US Listed Semiconductor 25 Index before fees and expenses. The ETF trades on Nasdaq, was launched on December 20, 2011, and carries a 0.35% net expense ratio. The portfolio contained 26 holdings as of September 2026, covering companies involved in semiconductor production and equipment.

The structure provides exposure across different stages of the chip supply chain rather than focusing on a single company or technology. However, the relatively narrow industry mandate means sector-wide changes in demand, supply, valuations and capital spending can have a substantial effect on the fund.

Nvidia Remains the Largest Holding

Portfolio concentration is a central feature of SMH. As of September 10, Nvidia represented 22.42% of net assets, followed by Taiwan Semiconductor Manufacturing at 9.77%, Broadcom at 5.90%, AMD at 5.73% and Micron Technology at 5.64%. The portfolio also includes ASML, Intel, Lam Research, Analog Devices, Texas Instruments and Qualcomm, providing exposure to chip manufacturing, equipment, memory and related technologies.

Nvidia’s weighting means the ETF is particularly sensitive to the economics of AI infrastructure. Strong demand for accelerated computing and data-center capacity can support revenue expectations across the semiconductor ecosystem, while weaker capital spending or concerns about stretched valuations can have the opposite effect.

Strong Performance Meets Higher Valuation Risk

SMH had a net asset value of $560.22 as of September 10, 2026, with total net assets of $69.32 billion. Its 55.57% year-to-date return underscores the strength of semiconductor equities during the period, but also places greater emphasis on valuation and earnings expectations. Semiconductor stocks can move sharply as investors reassess future chip demand, production capacity and corporate capital expenditure.

The sector is also highly sensitive to interest rates and global economic conditions. Higher Treasury yields can pressure valuations for growth-oriented technology companies, while slower economic activity could weaken demand for chips used in automobiles, industrial equipment and consumer electronics. At the same time, continued AI investment remains a potential source of demand for advanced processors, networking components and semiconductor manufacturing equipment.

Going forward, investors will be watching AI data-center spending, Nvidia and other major chipmakers’ earnings, semiconductor equipment orders, memory pricing and global interest rates. For Israeli investors, movements in the dollar-shekel exchange rate add another variable to returns from a U.S.-listed ETF. SMH’s concentrated structure makes the direction of the semiconductor cycle, rather than the broader equity market alone, a key factor in its future performance.