Semiconductor ETF Delivering 210% Gains Over 3 Years: Here's Why Chip Exposure Matters for AI Portfolio

The Semiconductor Play on AI Infrastructure

The artificial intelligence market expansion is reshaping investment opportunities. According to UN trade data from 2025, global AI market value is projected to reach $4.8 trillion by 2033, up from $189 billion in 2023—representing a 25-fold growth trajectory within the decade. Behind this explosive demand sits a critical but often overlooked infrastructure layer: semiconductors.

Investors seeking AI exposure have two pathways: hunt for individual stock picks or diversify through sector-focused vehicles. ETFs present a compelling middle ground, offering lower risk concentration compared to single-stock bets while maintaining targeted sector exposure.

VanEck Semiconductor ETF (SMH): The Numbers Tell the Story

Among chip-focused ETFs, the VanEck Semiconductor ETF (NASDAQ: SMH) stands out with substantial performance metrics. Since launch in late 2011, the fund has compiled a robust track record spanning multiple market cycles:

Performance Snapshot (as of Nov 24, 2025):

• Year-to-date: 40.1% (vs. S&P 500’s 15.3%)
• 3-year return: 210% (vs. S&P 500’s 73.9%)
• 5-year return: 245% (vs. S&P 500’s 98.6%)
• 10-year return: 1,310% (vs. S&P 500’s 282%)

The 3-year timeframe carries particular significance—it aligns with the November 2022 launch of ChatGPT, marking the generative AI era’s breakthrough moment. The fund’s 210% return over this period demonstrates how semiconductor companies capitalized on this transformation.

Portfolio Architecture: Diversified Chip Ecosystem

SMH tracks the MVIS US Listed Semiconductor 25 Index, holding 25 globally-listed companies across the entire chip value chain. The fund structure employs modified market-cap weighting with a 20% holding cap, preventing over-concentration in any single name.

Top 10 Holdings Breakdown: The portfolio spans three distinct categories:

Chip Designers & Manufacturers:

• Nvidia (NVDA): $4.4T market cap, 18.5% portfolio weight, 1,010% 3-year return
• Broadcom (AVGO): $1.8T market cap, 8.44% weight, 645% return
• Advanced Micro Devices (AMD): $351B market cap, 5.86% weight, 181% return
• Micron Technology: $251B market cap, 6.11% weight, 286% return
• Intel: $170B market cap, 5.42% weight, 24.9% return

Foundry Services:

• Taiwan Semiconductor Manufacturing (TSM): $1.2T market cap, 9.69% weight, 265% return

Equipment Suppliers:

• ASML Holding: $382B market cap, 5.59% weight, 67.8% return
• Applied Materials: $184B market cap, 5.66% weight, 120% return
• Lam Research: $190B market cap, 5.48% weight, 237% return
• KLA Corp: $150B market cap, 4.81% weight, 203% return

These top 10 positions account for 75.56% of the fund’s total assets, which currently stand at $34.8 billion.

Why Semiconductors Unlock AI Opportunity

The semiconductor sector isn’t merely benefiting from AI—it’s essential infrastructure. Here’s the chain of influence:

Data Center Processing: Nvidia’s GPU dominance in AI-enabled servers represents just the visible layer. Behind every AI data center sits semiconductor equipment makers, foundries, and chipmakers coordinating across the entire supply chain.

Consumer AI Integration: Beyond data centers, AI chips power everything from smartphones to autonomous vehicles to humanoid robots. These applications are transitioning from lab prototypes to market deployment, creating sustained demand visibility.

Capital Spending Momentum: Major tech companies continue increasing capital expenditure on AI infrastructure buildout. This spending cascade flows through Broadcom’s networking products, Applied Materials’ fabrication equipment, ASML’s lithography systems, and downstream manufacturers.

Technical Metrics: Growth Potential Ahead

Wall Street projects 5-year annualized earnings-per-share growth ranging from 8% to 46.6% across major holdings. Nvidia leads at 46.6%, while foundry and equipment players cluster between 8% and 30.3%. These growth rates far exceed broader market expectations, justifying premium valuations.

The fund charges a 0.35% expense ratio—reasonable for thematic sector exposure—and maintains liquidity comparable to broad-based indexes.

Risk Management Through Diversification

Rather than concentrating capital in Nvidia or other individual chip names, SMH spreads exposure across designers, foundries, and equipment suppliers. This structure captures upside from the entire semiconductor ecosystem while reducing single-company risk.

For investors building a multi-asset portfolio—whether allocating domestically or internationally across markets like those relevant to NZ investors—sector ETFs provide a practical implementation vehicle balancing growth potential with volatility management.

The Bottom Line

The semiconductor sector remains positioned at the center of the AI infrastructure build. The VanEck Semiconductor ETF’s 210% three-year return reflects this positioning, and with driverless vehicles approaching regulatory approval and humanoid robots nearing commercial viability, the infrastructure upgrade cycle appears far from complete.

Whether as a core holding or portfolio complement, exposure to semiconductor leaders through a diversified ETF structure offers a less volatile entry point than individual stock picking in rapidly evolving technology sectors.