Massive capital expenditure commitments from the world’s largest tech companies are fueling unprecedented demand for semiconductors and the ETFs that track them.
Microsoft, Amazon, Alphabet, Meta Platforms, and Oracle have collectively committed to spending nearly $700 billion on capital expenditures in 2026, representing an 81% increase over the prior year.
The bulk of that spending is expected to drive semiconductor demand, making sector-focused ETFs an increasingly attractive vehicle for investors seeking exposure to the trend.
Three ETFs are competing for that investor capital: the VanEck Semiconductor ETF (NASDAQ: SMH), the iShares Semiconductor ETF (NASDAQ: SOXX), and the Invesco PHLX Semiconductor ETF (NASDAQ: SOXQ).
While all three funds hold substantially the same underlying names, the key differences between them come down to cost and concentration.
SMH tracks 25 stocks within the MVIS US Listed Semiconductor 25 Index and is market cap-weighted with essentially no cap on individual positions, giving it a heavier mega-cap tilt.
SOXX holds 30 names and tracks the ICE Semiconductor Index, also using a cap-weighted approach but with limits on individual position sizes, creating a slight tilt toward smaller companies.
SOXQ tracks the PHLX Semiconductor Sector Index with a portfolio that is substantially similar to SOXX’s, but carries nearly half the expense ratio of its iShares rival.
The lower expense ratio has allowed SOXQ to modestly outperform SOXX over the past several years, a pattern that is consistent with what investors would expect when two funds hold nearly identical portfolios.
SMH’s concentrated mega-cap structure makes it the more direct AI infrastructure play, but that distinction narrows the real competition down to SMH versus SOXQ for most investors.
Since the three funds are likely to perform similarly over time, with outperformance at any given moment depending largely on whether mega-cap stocks are leading the market, cost becomes the decisive factor.
At nearly half the expense ratio of SOXX and with a slightly broader diversification profile than SMH, SOXQ presents the most compelling value proposition among the three funds.
Investors should treat all three of these ETFs as satellite rather than core holdings, keeping position sizes limited given the inherent concentration risk of a single-sector fund.
Capital expenditure growth, combined with anticipated revenue and earnings expansion across the semiconductor industry over the coming years, supports a constructive long-term outlook for the sector regardless of which fund investors choose.
