Generated September 5, 2026.
Overview
PSI and SMH are both semiconductor-focused equity ETFs, but they differ in scope and construction. PSI tracks a broader semiconductor universe with exposure across memory, logic, and equipment makers. SMH targets a narrower, more concentrated portfolio of 25 of the largest U.S.-listed semiconductor companies via the MVIS index. Both carry significant volatility (2.36, 2.05) and minimal dividend yield, making them growth-oriented holdings rather than income vehicles. SMH costs less to own at 0.35% versus 0.56%, and it holds nearly 30 times more assets ($66.4B vs. $2.33B), which typically translates to tighter spreads and better liquidity. PSI exhibits higher beta at 2.36 compared to 2.05, reflecting either higher leverage to semiconductor cyclicality or tilt toward smaller/more volatile names within the sector. Both distribute minimally—0.05% and 0.19% annually—so total return, not income, drives the investment thesis.
Who each is best for
- PSI: Fits investors seeking broader exposure across the semiconductor supply chain (memory, processors, equipment vendors) who can tolerate higher volatility and are comfortable with a less liquid, smaller fund in exchange for potentially different sector coverage.
- SMH: Designed for semiconductor growth investors who prefer concentrated exposure to the 25 largest publicly traded chip companies, value lower fees and deeper liquidity, and want a benchmark-aligned approach to the sector.
Key risks to know
- Sector concentration and cyclicality. Both funds carry the inherent risk of a downturn in semiconductor demand or pricing power, which can trigger sharp drops across the entire holdings. Beta readings of 2.36 and 2.05 indicate both funds amplify broad market swings significantly.
- Valuation sensitivity. Semiconductors are traded largely on forward earnings and growth expectations. Rising interest rates or economic slowdown can pressure multiples sharply, and historically the sector has experienced volatile drawdowns during tech resets.
- Geopolitical and supply-chain risk. Taiwan concentration, U.S.–China trade tensions, and fab capacity constraints affect pricing and availability. Regulatory changes (CHIPS Act, export controls) can alter competitive dynamics or profitability across the holdings.
- PSI liquidity and transparency. With $2.33B and lower trading volume than SMH, PSI may see wider bid-ask spreads and less predictable intraday pricing, particularly in volatile markets.
- SMH concentration in mega-cap names. The 25-holding limit means SMH is heavily weighted toward the largest few companies; performance hinges on a small number of stocks, amplifying company-specific risk relative to a broader semiconductor exposure.
Bottom line
If you want low-cost, liquid access to the 25 largest semiconductor names via an index, SMH's lower fees (0.35%), vastly larger asset base, and moderate beta (2.05) are compelling. If you prefer broader semiconductor supply-chain exposure and don't mind paying a higher fee or accepting tighter liquidity, PSI may offer different diversification within the sector. Both are volatile growth vehicles, not income plays; neither is suitable for investors seeking yield. Past performance doesn't predict future results.
AI-generated analysis for educational purposes only. Verify important details independently; past performance does not guarantee future results.
