The most popular semiconductor exchange-traded fund in the market has been losing ground this year to a lesser-known rival, and the gap has grown to roughly 20 percentage points. The reason has less to do with which stocks each fund holds than with how much weight each stock gets, according to Yahoo Finance.
The VanEck Semiconductor ETF, trading under the ticker SMH, has long been the default chip fund for most brokerage accounts. It is market-cap weighted, which means the biggest companies get the biggest slices. That structure has historically rewarded investors when the largest names in semiconductors outperform the rest.
In 2026, that is not what happened.
The iShares Semiconductor ETF, ticker SOXX, tracks the NYSE Semiconductor Index using a capped, more evenly distributed methodology. It holds many of the same companies as SMH, but the positions are spread more closely together across the top of the portfolio. That structural difference has produced a large gap in returns this year. SOXX returned 72 percent year to date, beating SMH by roughly 20 percentage points.
SMH's top five holdings, according to the most recent fact sheet dated May 27, 2026, are AMD at 10.33 percent, Broadcom at 9.57 percent, Micron at 9.39 percent, Taiwan Semiconductor at 8.75 percent, and NVIDIA at 8.4 percent. The top 10 combined represent roughly 71 percent of total assets.
That concentration is precisely what SMH investors sign up for. The fund puts real weight behind industry leaders and does not dilute exposure with smaller names. Its expense ratio is 0.35 percent, which is competitive for a sector fund, and its liquidity is deep. For investors seeking a single ticker that captures the mega-cap semiconductor complex, SMH has been a defensible core holding.
The problem in 2026 is that AMD, Broadcom, and Micron each carry weights above 9 percent in SMH, leaving the fund exposed when those specific names lag the broader group. Meanwhile, mid-weighted names inside SMH, such as Lam Research at 5.62 percent and Applied Materials at 5.53 percent, had strong individual performances but contributed less to overall fund returns because their weights are smaller.
SOXX's capped structure meant those same mid-tier performers pulled more weight in determining the fund's total return. When strength in the chip sector broadened out beyond the top three or four names, SOXX was better positioned to capture it.
For cost-conscious investors, there is a third option worth noting. SOXQ delivers the same semiconductor sector exposure as SOXX at an expense ratio of 0.10 percent, roughly a third of SMH's fee, and also returned 72 percent year to date.
The performance gap in 2026 does not necessarily mean SMH is the wrong choice for all investors going forward. Its concentrated structure can work powerfully in years when the largest chip companies lead the sector. But this year has illustrated that fund construction, not just stock selection, can determine which fund wins in any given environment.