Best Semiconductor and AI ETFs for 2025: SMH Competitors and Growth Projections

By Editorial Team - September 07, 2025

The semiconductor industry remains a pivotal engine of global technological advancement, powering everything from smartphones and electric vehicles to cutting-edge AI and cloud computing infrastructure. For investors seeking to gain diversified exposure to this booming sector, semiconductor and AI-themed exchange-traded funds (ETFs) have emerged as efficient vehicles.

A set of leading semiconductor and AI ETFs competing with VanEck Semiconductor ETF (SMH) for 2025, along with key growth projections and features, is as follows:

Top Semiconductor ETFs (Competitors to SMH)

VanEck Semiconductor ETF (SMH): The largest semiconductor ETF tracking the MVIS US Listed Semiconductor 25 Index, heavily weighted toward Nvidia (20%+), TSMC, and Broadcom. It offers concentrated exposure and has a 5-year annualized return of around 29.6%. Expense ratio: 0.35%.
iShares Semiconductor ETF (SOXX): Tracks the ICE Semiconductor Sector Index with roughly 25% international exposure. More diversified, holding top companies like AMD and Nvidia. 5-year annualized return is about 21.6%. Expense ratio: 0.34%.
Global X Semiconductor ETF (SEMI): Listed on the ASX, tracks a global semiconductor index focused on top names like Nvidia, Broadcom, and TSMC. Expense ratio: 0.45%.
SPDR S&P Semiconductor ETF (XSD): Focuses on small and mid-cap semiconductor companies, more diversified away from giants. Expense ratio: 0.35%.
Direxion Daily Semiconductor Bull 3X Shares (SOXL): A 3x leveraged ETF for aggressive investors, but has risks due to daily resetting effects.

AI-focused ETFs

AI Powered Equity ETF (AIEQ): An actively managed AI equity fund focusing on companies that benefit from AI innovation.
iShares Future AI & Tech ETF (ARTY): Tracks companies advancing in AI and technology sectors.

Growth Projections and Market Outlook for 2025

The semiconductor sector is strongly supported by rising demand driven by AI computation needs, 5G rollout, autonomous vehicles, and the Internet of Things (IoT). Firms specializing in advanced chips like Nvidia, ASML, and TSMC are at the forefront of this growth.

Analysts project the VanEck Semiconductor ETF (SMH) could achieve price appreciation in the range of 30% to 50% during 2025, reflecting strong fundamentals and ongoing AI-driven demand.
The broader industry is expected to benefit from continuous scaling of compute power, innovations in fabless manufacturing, and new technologies such as AI accelerators.
While high valuations and sector volatility persist, long-term trends in digital transformation underpin sustained growth potential.

Investment Strategies for Semiconductor ETFs in 2025

Balanced Exposure: Combining large-cap ETFs like SMH or SOXX with small- and mid-cap focused funds like XSD can capture both established leaders and promising growth companies.
Thematic Diversification: Incorporating AI-focused ETFs (AIEQ, ARTY) adds allocation to the broader technology ecosystem driving semiconductor demand.
Risk Management: Leveraged ETFs like SOXL offer amplified returns but carry elevated risk, suitable only for experienced investors with short-term trading horizons.
Global Considerations: ETFs with international exposure mitigate country-specific risks and tap into global innovation hubs.
Liquidity and Costs: Prioritize ETFs with high liquidity and reasonable expense ratios (generally below 0.40% for semiconductor ETFs) to optimize costs and execution efficiency.

Summary List of Select ETFs

SMH: Large-cap semiconductor exposure; concentrated portfolio; 5-year return ~29.6%; 0.35% expense ratio.
SOXX: Diversified large and international holdings; 5-year return ~21.6%; 0.34% expense ratio.
SEMI: Global semiconductor exposure; ASX-listed; 0.45% expense ratio.
XSD: Small & mid-cap semiconductor firms; 5-year return ~18.2%; 0.35% expense ratio.
SOXL: 3x leveraged semiconductor ETF; high volatility; 0.75% expense ratio.
AIEQ: AI-focused, actively managed equity ETF.
ARTY: AI and future tech-focused ETF.

Simulated Portfolio Allocation for Semiconductor and AI ETFs in 2025

Total Portfolio Size: 100%

Allocation Breakdown

VanEck Semiconductor ETF (SMH) — 40%
- Rationale: Core large-cap semiconductor exposure focused on industry leaders like Nvidia, TSMC, and Broadcom, providing stable growth from established firms.
iShares Semiconductor ETF (SOXX) — 25%
- Rationale: Diversification with additional international exposure and balanced portfolio of large and mid-cap semiconductor companies with solid fundamentals.
SPDR S&P Semiconductor ETF (XSD) — 15%
- Rationale: Exposure to small and mid-cap semiconductor companies, capturing growth from emerging industry players and innovators.
AI Powered Equity ETF (AIEQ) — 10%
- Rationale: Active management targeting AI sector leaders to capitalize on AI-driven growth beyond semiconductor hardware fundamentals.
iShares Future AI & Technology ETF (ARTY) — 10%
- Rationale: Broad exposure to AI and emerging technology companies, complementing semiconductor investments with end-market demand drivers and innovation themes.

Investment Strategy Highlights

Diversification Across Cap Sizes and Geographies: This allocation balances large-cap stability (SMH, SOXX) with growth potential from smaller companies (XSD) and international firms.
Thematic AI Exposure: Separate AI-focused ETFs (AIEQ, ARTY) provide exposure to software, AI service providers, and technology enablers, supporting sector tailwinds.
Risk Management: Avoids leveraged ETFs to maintain moderate volatility suitable for medium- to long-term investors interested in growth with controlled risk.
Cost Efficiency: Prioritizes funds with reasonable expense ratios (0.34–0.45%), balancing performance and fees.

This model portfolio aims to capture the growth opportunities in semiconductor manufacturing and AI innovation expected across 2025 while mitigating concentration risk by spreading investments across complementary ETFs.

Final Recommendations and Confidence Levels for Semiconductor and AI ETFs in 2025

Based on current sector fundamentals, growth forecasts, expense profiles, and volatility considerations, here are buy/hold/sell recommendations with confidence levels and suggested investment timeframes for the key ETFs:

VanEck Semiconductor ETF (SMH)

Recommendation: Buy
Confidence Level: High
Suggested Timeframe: Buy and hold for 12–24 months
Rationale: SMH offers concentrated exposure to industry leaders with robust AI-driven demand tailwinds and attractive mid-term growth potential. Reasonable expense ratio supports long-term holding.

iShares Semiconductor ETF (SOXX)

Recommendation: Buy
Confidence Level: Medium to High
Suggested Timeframe: Buy and hold for 12–18 months
Rationale: SOXX provides diversified and partly international semiconductor exposure, balancing growth with risk mitigation, making it a strong core holding.

SPDR S&P Semiconductor ETF (XSD)

Recommendation: Hold
Confidence Level: Medium
Suggested Timeframe: Hold with a watchful eye on quarterly earnings; 6 to 12 months
Rationale: Exposure to smaller firms carries higher volatility and execution risk but offers potential upside; suitable for investors with moderate risk tolerance.

Global X Semiconductor ETF (SEMI)

Recommendation: Hold
Confidence Level: Medium to Low
Suggested Timeframe: Hold for 6–12 months while monitoring global supply chain developments
Rationale: Global diversification is a plus, but lack of available 5-year performance data and higher expenses warrant cautious allocation.

Direxion Daily Semiconductor Bull 3X Shares (SOXL)

Recommendation: Sell or trade very cautiously
Confidence Level: High (for risk assessment)
Suggested Timeframe: Short-term trading only; not suitable for buy-and-hold
Rationale: The leverage introduces heightened risk and volatility; recommended only for expert traders with short holding periods.

AI Powered Equity ETF (AIEQ)

Recommendation: Buy
Confidence Level: Medium
Suggested Timeframe: Buy and hold for 12 months, monitor active management performance
Rationale: Active management targeting AI innovation offers dynamic exposure; performance depends on manager skill and sector trends.

iShares Future AI & Technology ETF (ARTY)

Recommendation: Buy
Confidence Level: Medium to High
Suggested Timeframe: Buy and hold for 12–18 months
Rationale: Broad exposure to AI and emerging tech sectors complements semiconductors and offers growth from end-market innovation drivers.

This recommendation framework aims to guide investors in portfolio decisions aligned with their objectives and risk profiles while capitalizing on the robust growth potential projected for semiconductors and AI themes throughout 2025.

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