“I would say that hardware is the bone of the head, the skull. The semiconductor is the brain within the head. The software is the wisdom and data is the knowledge.”
— Masayoshi Son, Japanese entrepreneur and investor
In today’s market, the technology sector has been soaring. As innovation pushes forward, one thing becomes clear: semiconductors are at the core of modern technology. They provide the foundation for almost every electronic device, powering everything from smartphones to artificial intelligence (AI).
Fueling this surge is the One Big Beautiful Bill Act, which has boosted the semiconductor industry through manufacturing tax credits, providing additional funding for research and development and strengthening supply chain security.
This week’s ETF, the iShares Semiconductor ETF (SOXX), is riding this wave of success and benefitting from the current political landscape. This fund tracks a modified, market-cap-weighted index of the 30 largest U.S.-listed semiconductor companies. It uses a sampling strategy in tracking its index, which is reconstituted annually and rebalanced quarterly.
The fund is non-diversified, and it typically allocates at least 80% of its assets to the individual securities that make up its underlying index, as well as to investments that closely mirror the economic characteristics of those securities. The remaining up to 20% of assets may be invested in futures, options, swap contracts, cash and cash equivalents.
SOXX has net assets of $13.41 billion and an expense ratio of 0.34%.
Its top 10 holdings make up about 59.78% of its total assets and include Advanced Micro Devices, Inc. (NASDAQ: AMD), 9.77%; NVIDIA Corporation (NASDAQ: NVDA), 8.57%; Broadcom Inc. (NASDAQ: AVGO), 8.17%; Texas Instruments Incorporated (NASDAQ: TXN), 6.26%; QUALCOMM Incorporated (NASDAQ: QCOM), 6.26%; Monolithic Power Systems, Inc. (NASDAQ: MPWR), 4.20%; Micron Technology, Inc. (NASDAQ: MU), 4.19%; Intel Corporation (NASDAQ: INTC), 4.14%; Lam Research Corporation (NASDAQ: LRCX), 4.12% and NXP Semiconductors N.V. (NASDAQ: NXPI), 4.09%.
Chart courtesy of www.stockcharts.com.
As shown from the chart above, SOXX is exhibiting resilience this year. Despite a severe drop in April, it rebounded very quickly and has been flying high. It jumped 2.22% in the last month, 19.95% in the last three months and 14.17% year-to-date. For investors looking to fit into the current winners of the market, this fund could be a great avenue to slip on their “SOXX” and step into a new opportunity.
However, the semiconductor industry is certainly a riskier investment and is known for its high volatility. Investors should evaluate their own risk tolerance and personal investing goals. Always try to use due diligence and research before adding any stock, fund or ETF to your portfolio.
As I write each week, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
