SMH, SOXQ: Since Macro Trumps Micro, Size Doesn't Matter


  • Over the past decade, everybody and their mother have been buying semiconductor ETFs, leading to exponential AuM growth in this hot industry.
  • The greater the importance of semiconductors and the more fierce the economic (and political) battle between the US and China - the more noise and regulation the industry suffers from.
  • SMH is the largest semiconductor ETF, with a non-US touch, and the obvious pick for most investors who are looking to have long exposure to this hot industry.
  • SOXQ is the smallest semiconductor ETF, with a more US-focused approach. It's way younger but also cheaper and yielding more than SMH, making it a worthwhile-examining contender.
  • There are more and more clouds floating in the semiconductor skies and they seem as dark/scary as they looked ahead of previous major global economic slowdowns.
  • This idea was discussed in more depth with members of my private investing community, Wheel of Fortune. Learn More »

Main microchip on the motherboard


All Eyes Are on Semiconductors

Semiconductors is one of the industries that attract the most attention from investors and decision-makers alike.

On one hand, chips have become an essential part of every innovative product that comes to the market, ranging from

Shortage of chips immediately translate into severe delays along the supply-chain, hurting manufacturing, production and delivery times of a long list of products.


US Export Control - Impact And Opportunity For China's Semiconductor Industry


semiconductors have become one of the most closely-watched and closely-supervised/regulated industries, functioning as a barometer for both the economic as well as the political playing fields.


In-spite of the very rough patch these ETFs are going through over the past year, they still manage over $20B in AuM, out of which nearly 90% (~$18B) is concentrated in the top-3 ETFs.


Data by YCharts

the average current volatility of a semiconductor ETF is close to 50%, significantly higher than blue chips (DIA's 20%), large-caps (SPY's 27%) and even big tech (QQQ's 36%)


Between Mar. 23, 2020 (market bottom) to Dec. 27, 2021 (market peak): - Absolute total returns


returns since Dec. 27, 2021 - Absolute total returns:


So far in 2022, SOXQ has performed in line with ^SOX (slight outperformance for the former) but it has underperformed SMH by ~1.8%.


Gloom Hanging Over Chip Stocks Met by Growing Chorus of Optimism


Data by YCharts

Data by YCharts



the most recent data is already putting global semiconductor sales at negative Y/Y territory, something that coincided with previous severe economic downturns.


Use the Correlation Between the Economy & Stock Market to Your Advantage

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Additional disclosure: Short SOXL (hedge)

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