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A Guide to Semiconductor ETFs

Semiconductors are no longer just about smartphones, PCs and cars. Artificial intelligence (AI) has become a major growth driver for the chip industry, with cloud companies and data-center operators spending heavily on AI infrastructure.

The numbers show how strong the demand has become. Global semiconductor sales reached $403.3 billion in Q2 2026, up 35.1% from Q1. June sales alone rose 123.6% year over year to $134.5 billion, according to the Semiconductor Industry Association (SIA). Solid sales across the Americas, the Asia Pacific, and China drove market growth.

The outlook is also getting bigger. WSTS now expects global semiconductor sales to reach about $1.5 trillion in 2026, reflecting the rapid expansion of AI and advanced computing. For 2027, WSTS forecasts the global semiconductor market to grow a further 27%, reaching about $1.9 trillion.

Memory Chips Are in High Demand

AI is creating demand across the semiconductor supply chain, but memory chips are getting special attention. AI servers need huge amounts of high-bandwidth memory (“HBM”) to process data quickly. Demand for DRAM and NAND is also rising as data centers add more storage and computing capacity.

The sharp uptick in chip demand in 2026 is driven by the Memory segment, which is forecast to surge around 250% year over year, reaching more than $800 billion in 2026. Continued strong demand for AI infrastructure, HBM and accelerated computing platforms remains the primary growth driver.

Logic is expected to grow 37% in 2026. For 2027, Memory is expected to lead market expansion with projected growth of 32%, while Logic is forecast to increase by 27%.

Omdia expects semiconductor revenues to surge 94.1% in 2026, with strong growth in DRAM and NAND. It estimates that memory chips could account for more than half of total semiconductor revenues this year.

Data Centers Are the Big Growth Engine

Companies are spending billions of dollars on GPUs, networking equipment, advanced processors and memory to support AI workloads.

UBS projects hyperscalers to spend $4.1 trillion on AI infrastructure from 2026 to 2028, tripling the $1.3 trillion deployed over the previous six years, per 24/7 Wall Street, cited by Yahoo Finance. Goldman Sachs Research expects $1 trillion of AI-related investment around the globe in 2026.

This spending creates opportunities for chipmakers across several parts of the industry rather than just for the companies making AI processors.

NVIDIA Raises the Bar on AI Growth

Chip behemoth NVIDIA NVDA projected about 70% revenue growth in fiscal 2028. If NVIDIA achieves the projected growth rate, fiscal 2028 revenues could reach roughly $690 billion to $700 billion, exceeding the Zacks Consensus Estimate of $552.90 billion (up 42.33% year over year).

For the upcoming quarter, NVIDIA expects revenues between $105.8 billion and $110.1 billion, above the Zacks Consensus Estimate of $102.0 billion.AI demand is growing much faster as more AI companies, startups and technologies are expanding.

NVIDIA said sovereign AI initiatives, neocloud providers, startups and enterprises are all contributing significantly to growth.The rapid adoption of agentic AI could further increase computing requirements.

NVIDIA's outlook suggests AI infrastructure spending is continuing to accelerate, with no clear signs of a peak yet. However, thanks to rising memory prices, chip companies are likely to see margin pressure.

Any Downside Risks?

The outlook is strong, but semiconductor ETFs are not low-risk investments. Chip stocks can move sharply when investors worry about valuations, AI spending, trade restrictions, supply shortages, Fed policies or a slowdown in the global economy.

Also,several chip ETFs are trading at an expensive valuation. Invesco PHLX Semiconductor ETF SOXQ currently trades at a price-to-earnings ratio of 41.95X on a trailing-12-month basis. Semiconductor – General industry’s forward P/E stands at 37.0X compared with the S&P 500’s forward P/E of 19.09X.

ETFs in Focus

Against this backdrop, below we highlight a few ETFs that should be in focus.

iShares Semiconductor ETF SOXX

The underlying ICE Semiconductor Index measures the performance of U.S. traded securities of companies engaged in the semiconductor business. The $41.9-billion ETF charges 33 bps in fees. It trades at an average daily volume of 10 million shares.

VanEck Semiconductor ETF SMH

The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The $67.9-billion ETF charges 35 bps in fees. It trades at an average daily volume of 11 million shares.

Strive U.S. Semiconductor ETF SHOC

The underlying Solactive United States Semiconductors 30 Capped Index measures the performance of the largest 30 U.S. companies in the semiconductor sector. The $228.6-million fund charges 40 bps in fees.

State Street SPDR S&P Semiconductor ETF XSD

The underlying S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The $2.63-billion fund charges 35 bps in fees. The average trading volume of the fund is 120,000 million shares.

Xtrackers Semiconductor Select Equity ETF CHPX

The underlying Global X AI Semiconductor & Quantum Index tracks the performance of companies that are involved in the artificial intelligence, semiconductor and quantum computing ecosystems. The $118.3-million fund charges 50 bps in fees. The average trading volume of the fund is 106,000 million shares.

Invesco PHLX Semiconductor ETF (SOXQ)

The underlying PHLX Semiconductor Sector Index measures the performance of the 30 largest U.S.-listed securities of companies engaged in the semiconductor business. The $2.9-billion fund charges 19 bps in fees. The average trading volume of the fund is 2.63 million shares.

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