Now, I reckon there’s a good deal of fuss being made over this here “artificial intelligence,” and rightly so. It’s the latest marvel, they say, a machine that can think. Seems a bit presumptuous, if you ask me, but then, folks have always been prone to overstatement. Still, a fella can’t deny it’s stirring up a heap of opportunity for those with a mind to profit. It’s early days yet, mind you – like staking a claim in a new gold rush, but with silicon instead of nuggets.
There’s a good bit of chatter ’bout companies like Nvidia (NVDA 0.79%), and rightly so. They’ve built themselves a fine engine for these thinking machines, a sort of brain-builder, if you will. And Micron Technologies (MU 2.61%) is seeing a boom, as these machines are thirsty for memory – more so than a politician for votes, I suspect. These are good companies, no doubt, but chasing individual stocks in this whirlwind is like trying to catch greased lightning. A man needs a wider net, a bit more stability.
Now, I’ve seen a good many booms and busts in my time, and I’ve learned a thing or two about spreading your risk. Putting all your eggs in one basket – even a shiny, new, AI-powered basket – is a fool’s errand. That’s why I’ve been giving some thought to these Exchange Traded Funds – ETFs, they call ’em. A way to own a piece of the whole pie, rather than just a sliver. They trade like stocks, which is convenient, and they give a fella a bit of breathing room when the market gets to bucking.
A Fund That’s Got Its Wits About It
I wrote a spell ago, back in mid-January of ’25, that the best way to play this AI game wasn’t to chase the flashiest names, but to look at the foundation. The very bricks and mortar, so to speak. And I still hold to that notion. The best AI-focused ETF, in my humble opinion, is the VanEck Semiconductor ETF (SMH 0.47%). Semiconductors – chips, if you prefer – are the very lifeblood of this new technology. They’re in the servers that power these AI brains, and in every gadget they’re tryin’ to make smarter – from those pocket contraptions folks stare at all day to the horseless carriages they drive around.
Now, over the past year, this ETF has done right by its investors. Returned 62.6%, it did – nearly four times what the S&P 500‘s managed. And it’s been a steady performer for years, not just a flash in the pan. That tells me something. It suggests that this isn’t just a passing fancy, but a genuine shift in the landscape.
I still reckon the VanEck Semiconductor ETF is a shrewd play. These hyperscalers – the big tech companies with their massive data centers – are pourin’ money into AI faster than a gambler loses his fortune. And they’ll keep on doin’ so, I suspect. With a few exceptions – that Alphabet company, perhaps – it seems to me that the folks who make the chips and the equipment to make ’em are the ones who’ll truly profit from this revolution.
| ETF/Index | 1-Year Return | 3-Year Return | 5-Year Return | 10-Year Return |
|---|---|---|---|---|
| VanEck Semiconductor ETF | 62.6% | 236% | 243% | 1,860% |
| S&P 500 | 15.9% | 77.1% | 91% | 345% |
A Closer Look at This Fund
Now, what I like about the VanEck Semiconductor ETF is its history. It’s been around since 2011, which is a lifetime in this fast-moving world. It tracks the MVIS US Listed Semiconductor 25 index, which is a basket of companies involved in every stage of the chip-making process. There’s 25 stocks in the fund, all traded on a major U.S. exchange.
The fund uses a modified market-cap weighting, which means the biggest companies have the biggest influence, but it caps each holding at 20%. And the expense ratio – the fee you pay to own the fund – is a reasonable 0.35%.
| Holding No. | Company | Market Cap | Wall Street’s Projected Annualized EPS Growth Over Next 5 Years | Weight (% of Portfolio) | 5-Year Return |
|---|---|---|---|---|---|
| 1 | Nvidia | $4.6 trillion | 49.4% | 18.99% | 1,180% |
| 2 | Taiwan Semiconductor Manufacturing (TSM +1.83%) | $1.5 trillion | 24.8% | 10.84% | 193% |
| 3 | Broadcom (AVGO 1.02%) | $1.6 trillion | 37.5% | 7.42% | 703% |
| 4 | Micron | $420 billion | 76.6% | 6.01% | 364% |
| 5 | ASML Holding (ASML 0.94%) | $546 billion | 21.3% | 5.86% | 161% |
| 6 | Lam Research (LRCX 1.17%) | $283 billion | 24.9% | 5.63% | 349% |
| 7 | Intel (INTC 6.22%) | $235 billion | 46% | 5.09% | (12%) |
| 8 | Texas Instruments (TXN +0.98%) | $201 billion | 17.9% | 4.98% | 45.2% |
| 9 | Applied Materials (AMAT 0.44%) | $261 billion | 14% | 4.96% | 225% |
| 10 | KLA (KLAC 0.65%) | $188 billion | 16.5% | 4.80% | 408% |
| Total top 10 | N/A | N/A | N/A | 74.58% | N/A |
| Overall ETF | N/A | Total net assets of $44.9 billion | N/A | 100% | 243% |
| N/A | S&P 500 | N/A | N/A | N/A | 91% |
Now, these holdings fall into a few categories:
- Chip producers: Five of the top 10 are chipmakers – Nvidia, Broadcom, Micron, Intel, and Texas Instruments.
- Foundry: Taiwan Semiconductor Manufacturing is the world’s largest chip foundry. They make chips for companies that don’t have their own factories.
- Chip equipment manufacturers: ASML, Lam Research, Applied Materials, and KLA.
In short, the VanEck Semiconductor ETF is poised to continue benefiting from this new age of thinking machines. It’s a right smart investment, if you ask me, and a fella could do a lot worse with his hard-earned dollars.
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2026-02-11 14:03