XSD Semiconductor ETF: Is This Smart Beta Play Worth Your Portfolio Exposure Right Now?

The Performance Story Behind XSD

State Street SPDR S&P Semiconductor ETF (XSD) has been turning heads in recent market cycles. The fund delivered a solid 16.11% gain over the past year and surged 24.97% year-to-date (as of 11/21/2025), placing it among the stronger performers in the technology space. But before you jump in, there’s more to this story than headline returns.

Since its launch on 01/31/2006, XSD has evolved into one of the larger players in the Semiconductor sector, now commanding over $1.46 billion in assets. This growing AUM reflects increasing investor appetite for focused semiconductor exposure through a structured ETF vehicle.

Understanding the Smart Beta Advantage

What separates XSD from run-of-the-mill market cap weighted index funds? The answer lies in its modified equal-weight methodology. Rather than simply giving the most weight to the largest companies (like traditional cap-weighted indexes do), XSD targets stocks based on fundamental characteristics and sector positioning.

This smart beta approach is designed for investors who believe that traditional market cap weighted indexes don’t capture all opportunities. By weighting stocks more equally, XSD aims to reduce concentration risk while potentially capturing upside from mid-sized and smaller semiconductor names that might be overlooked in conventional indexes.

What’s Actually Inside XSD’s Portfolio?

The Semiconductor Select Industry Index that XSD tracks comprises stocks from the S&P Total Markets Index, covering all major U.S. exchanges (NYSE, AMEX, NASDAQ). The fund maintains approximately 42 holdings, which is somewhat concentrated compared to broader semiconductor ETF alternatives.

The top tier of XSD’s holdings tells an interesting tale. Rigetti Computing (RGTI) claims about 7.24% of the portfolio, followed by familiar names like Intel (INTC) and Advanced Micro Devices (AMD). This trio alone demonstrates the fund’s exposure mix—from established legacy chipmakers to more speculative quantum computing players. The top 10 holdings collectively represent roughly 36.31% of total assets, indicating meaningful concentration.

This weighting structure differs notably from competitors. While it creates potential for outsized gains in semiconductor boom cycles, it also amplifies downside risk during sector corrections.

The Cost Factor and Income Generation

Where XSD shines is its wallet-friendly fee structure. At just 0.35% annually, this product ranks among the cheapest options for semiconductor sector exposure. For investors managing portfolios over long timeframes, this seemingly small difference compounds into meaningful savings.

The fund also generates income, though modestly. The trailing 12-month dividend yield sits at 0.25%, providing some cash flow for patient holders.

Risk Profile: The Trade-Off You Need to Know

Here’s the catch—and this is crucial. XSD carries a beta of 1.64 with a standard deviation of 36.55% over the trailing three-year period. Translation: this fund amplifies semiconductor sector volatility by 64% compared to the broader market. During the past 52 weeks, XSD ranged from $160.63 to $353.65, underlining the wild swings inherent in this sector.

This makes XSD a high-risk proposition suitable primarily for investors with either longer time horizons or higher risk tolerance. It’s not a core holding for conservative portfolios.

How XSD Stacks Up Against Competitors

The semiconductor ETF landscape has become increasingly competitive. Two major alternatives deserve attention:

iShares Semiconductor ETF (SOXX) tracks the PHLX SOX index and manages $14.83 billion in assets with a 0.34% expense ratio. VanEck Semiconductor ETF (SMH) commands $33.66 billion while charging the same 0.35% fee as XSD and tracks the MVIS US Listed Semiconductor 25 Index.

The key differentiator? SOXX and SMH are substantially larger, suggesting broader institutional adoption and potentially tighter bid-ask spreads. SMH’s $33.66 billion in assets makes it roughly 22x larger than XSD. For investors prioritizing liquidity and lower single-stock concentration, those alternatives may present a more compelling case.

XSD’s unique angle—its modified equal-weight methodology and focused 42-holding approach—appeals to tactical traders betting on mid-tier semiconductor companies rather than core passive investors.

The Bottom Line

State Street SPDR S&P Semiconductor ETF offers legitimate exposure to semiconductor upside through a smart beta framework and industry-leading cost structure. The recent performance justifies consideration for growth-oriented portions of a portfolio.

However, the elevated volatility profile (1.64 beta), concentrated holdings structure, and relatively modest asset base compared to SOXX and SMH suggest XSD works best as a satellite position rather than a core holding. For investors specifically seeking smart beta exposure to semiconductors and comfortable with high-beta characteristics, XSD deserves a spot on your watchlist.