Exchange Traded Funds (ETFs)

ETF Talk: Slipping on a New Pair of SOXX

“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%.

Exclusive Three Defense Investments with Potential to Outperform

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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.