Generated July 2026 from current fund data.
Overview
SMH and SOXQ both track US semiconductor companies through index funds, but they differ fundamentally in index composition and breadth. SMH tracks the MVIS US Listed Semiconductor 25 Index—a narrower, 25-stock portfolio—while SOXQ follows the PHLX SOX Semiconductor Sector Index, which includes significantly more companies. That difference in index size drives their risk and return profiles: SMH carries less concentration risk through diversification, while SOXQ has tighter overlap with the broader semiconductor sector benchmark.
How they differ
The core distinction is index size: SMH holds 25 names versus SOXQ's broader SOX Index exposure. That translates directly to concentration—SMH spreads capital across more companies, reducing idiosyncratic stock risk, while SOXQ leans more heavily on a smaller set of mega-cap positions typical of the SOX methodology.
On cost, SOXQ edges ahead with a 0.19% expense ratio against SMH's 0.35%, a meaningful gap when holding for years. Distribution behavior differs too: SMH pays annually at 0.19%, while SOXQ distributes quarterly at 0.31%, giving SOXQ more frequent but fractionally higher yields.
Beta reflects their risk stance: SMH runs 1.97, SOXQ 2.19, confirming both amplify semiconductor volatility. SOXQ's higher beta likely reflects concentration in larger, more liquid names that can swing sharply on sector momentum. SMH's $65.1B in AUM dwarfs SOXQ's $2.61B, meaning SMH offers far tighter bid-ask spreads and less slippage on entry and exit.
Who each is best for
SMH: Fits investors seeking broad semiconductor exposure with lower execution costs and tighter spreads, since the fund's $65.1B scale keeps trading friction minimal.
SOXQ: Designed for investors willing to accept lower liquidity and a tighter index focus in exchange for lower annual fees and more frequent distributions.
Key risks to know
- Semiconductor cyclicality. Both funds carry concentration in a sector prone to boom-bust cycles driven by demand swings, inventory imbalances, and capex sentiment. A downturn in chip spending can pressure both holdings sharply.
- High beta amplification. With betas of 1.97 (SMH) and 2.19 (SOXQ), both magnify market downturns—in a 20% market correction, expect 40–44% declines in either fund.
- SOXQ liquidity and tracking risk. At $2.61B AUM, SOXQ is much smaller than SMH and may experience wider spreads, higher slippage on large trades, and potential tracking error relative to its index during volatile periods.
- SMH concentration by different mechanism. While SMH avoids single-stock risk through its 25-stock structure, it may overweight specific subsectors (memory, foundries, design) depending on index weighting, creating hidden concentration risk unlike SOXQ's sector-wide approach.
- Tax drag from annual vs. quarterly distributions. SMH's annual payout defers realization of gains but bunches distributions into one event; SOXQ's quarterly schedule spreads tax liability but may accelerate realized distributions over time.
Bottom line
SMH dominates on scale and cost: its $65.1B AUM, tighter spreads, and lower expense ratio make it the easier trade for most investors. SOXQ appeals to those seeking fractionally higher yields and quarterly income, provided they're comfortable with smaller AUM and lower liquidity. Both carry significant downside beta in a semiconductor downturn—picking between them hinges more on trading friction and income frequency than on risk profile. Past performance in semiconductors does not predict future returns.
AI-generated analysis for educational purposes only. Verify important details independently; past performance does not guarantee future results.
