Semiconductor names have been among the technology stars of 2024, with the VanEck Semiconductor ETF (SMH) higher by 43.60% year-to-date as of December 24. Impressive to be sure, but SMH’s fabless counterpart — the VanEck Fabless Semiconductor ETF (SMHX) — could be an idea to consider in 2025.
SMHX debuted in August and follows the MarketVector™ US Listed Fabless Semiconductor Index. In simple terms, the new exchange traded fund focuses on shares of companies that are classified as fabless semiconductor firms, meaning they design and innovate, but outsource production of their chips to foundry operators.
That’s a status that applies to some of the biggest names in the industry. For example, high-flying Nvidia (NVDA) and Broadcom (AVGO) — two of the largest companies in the world of any stripe — combine for more than 38% of the SMHX roster. So, while investors may not be familiar with the fabless vernacular, SMHX is home to plenty of familiar names.
SMHX Could Shine in 2025
Asking for chip stocks and ETFs to mirror this year’s performances in 2025 may be demanding. However, that doesn’t mean upside isn’t possible. In fact, the broader view of the industry, buoyed in large part by artificial intelligence (AI), is constructive. This indicates that SMHX merits consideration as a tactical idea.
AI intersects with other disruptive technologies, including cloud computing and cybersecurity. That intersection could help the new fund win in 2025. That underscores the relevance of SMHX, because some of the ETF’s holdings already have inroads into those industries.
“Cloud computing and cybersecurity are foundational to the digital economy, enabling innovation while ensuring resilience against digital threats. These sectors, alongside AI and nuclear energy, are bolstered by global investment and policy support,” noted Nick Frasse, associate product manager at VanEck. “The advent of SMRs (Small Modular Reactors), for instance, addresses energy needs for AI-driven industries, offering a sustainable solution to power-intensive technologies.”
Bottom line: 2025 is expected to be another year in which AI looms large for the broader technology investment thesis. Some experts believe it could be a defining year for tech at large. With semiconductors serving as the foundations of so many important tech advances, myriad tailwinds could support SMHX.
“The global economy is expected to provide strong tailwinds for the tech sector in 2025. Supportive policies and increased government spending are incentivizing innovation across a wide range of industries, including AI, semiconductors, cloud computing, and renewable energy,” added Frasse. “Advances in real-time AI processing are expanding applications from autonomous vehicles to healthcare solutions.”
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