SMH vs SOXX: What's the Better Semiconductor ETF Buy?

Core Insights - The semiconductor sector has been a significant beneficiary of the AI boom, with the VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX) being the two largest ETFs for investors seeking exposure to this market [1][7] Category Exposure - The primary distinction between the two ETFs lies in their concentration levels, with both tracking semiconductor manufacturers based on market capitalization and holding approximately 25-30 positions [2] - The VanEck ETF allows for unconstrained weighting, leading to substantial allocations for major companies like Nvidia and Taiwan Semiconductor Manufacturing, which together represent about one-third of the portfolio [3] - In contrast, the iShares ETF imposes caps on individual holdings, limiting the top five securities to 8% and other positions to 4%, while also capping American depositary receipts (ADRs) to a maximum of 10% of the portfolio [4][5] Investment Verdict - The choice between SMH and SOXX depends on the investor's preference for exposure to larger companies, with the VanEck ETF being more concentrated and tilted towards major semiconductor firms [5][6] - Given the current market conditions favoring large-cap stocks, the VanEck Semiconductor ETF is viewed as the more advantageous option at this time, although a more diversified approach may be preferable in the long term [6][8]