Key Points
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The semiconductor industry is a cyclical industry that’s currently riding on a high.
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The iShares Semiconductor ETF (SOXX) is the most effective way to get exposure to the semiconductor industry.
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Megacap tech stocks leading popular tech ETFs could limit their upside relative to SOXX to finish the year.
- 10 stocks we like better than iShares Trust – iShares Semiconductor ETF ›
It might not be the explosive gains some investors have gotten accustomed to over the past couple of years, but the tech sector as a whole is still performing well in 2026. Much of the attention goes to the “Magnificent Seven” stocks — Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta Platforms, and Tesla — but companies operating in the niche semiconductor segment of the tech sector have been among the best performers this year.
The iShares Semiconductor ETF (NASDAQ: SOXX) reflects this, up 89% year to date. Despite the impressive gains, the past month hasn’t been great, with the ETF down 4%.
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But even with its recent slide, I expect it to outperform popular tech ETFs like the Invesco Nasdaq-100 ETF, Vanguard Information Technology ETF, and the State Street Technology Select Sector SPDR ETF this year.
Semiconductor stocks are in the right place at the right time
SOXX holds 30 semiconductor stocks, ranging from those that design chips like Nvidia, make memory chips like Micron Technology, design networking equipment like Broadcom, or manufacture the chips to life like Taiwan Semiconductor Manufacturing.
As the current artificial intelligence boom intensifies, it has become more apparent just how important semiconductors are to the tech world. SOXX is a way to benefit from the sudden demand without having to pick a winner, which is why it has become so popular over the past year, up 130%.
Many of the top stocks leading SOXX higher operate in cyclical industries and are currently riding the highs. Their products are in high demand, giving them pricing power and delivering record profits and margins for many.
That won’t always be the case (hence why the semiconductor industry is considered cyclical), but the supply-demand imbalance driving much of the growth is likely to continue at least through most of next year.
Big tech’s upside could be limited to finish the year
Tech ETFs QQQM, VGT, and XLK are all off to great starts this year, up 16%, 22%, and 25% year to date, respectively. I expect all three to outperform the market this year, but I think their top holdings are why they will underperform SOXX.
Companies like Nvidia, Apple, and Microsoft are a large part of all three ETFs, whereas Nvidia is the only stock of the three included in SOXX. I believe the semiconductor companies leading the way in SOXX are much more likely to continue outperforming, given their cyclical highs and lower valuations.
I wouldn’t use SOXX as my sole tech ETF because of the companies it excludes, but it’s a great supplement to capture the industry’s overall importance.
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Stefon Walters has positions in Apple, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Micron Technology, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, Tesla, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.
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