The heavyweight US semiconductor ETFs, the SOXX + SMH, have experienced volatile flows, which shouldn’t come as a surprise considering the gyrations across the sector.
- Jan–Feb: SMH attracted ~US$3.9bn as AI enthusiasm peaked, while SOXX continued to see modest outflows.
- March: Tariff fears triggered broad semiconductor selling, with SOXX (-US$362m) and SMH (-US$1.9bn) both suffering heavy outflows.
- April: Dip-buying overwhelmingly favoured SMH (+US$3.7bn), compared with just +US$300m into SOXX, highlighting a clear divergence in investor preference.
- May–July: SOXX has recorded three straight months of outflows (-US$1.1bn, -US$2.0bn, -US$422m MTD), while SMH rebounded strongly (+US$2.1bn in June, +US$1.8bn MTD in July), signalling investors are rotating toward SMH.
The one-year chart makes the SOXX-to-SMH rotation very clear; SMH has become the vehicle of choice, at a glance arguably surprising as it’s marginally more expensive, BUT it’s outperformed the SOXX by ~20% over the last year, and money follows performance.
- It’s important for optimum performance that investors know when a particular fund is losing its dominance.
For background, SMH is the higher-conviction, more concentrated vehicle with greater NVDA and international exposure. SOXX offers broader, more balanced semiconductor exposure with less single-stock concentration risk. The choice between them largely comes down to views on NVDA and appetite for geographic diversification within the sector.
The SMH ETF has become MM’s US vehicle of choice for exposure to the semiconductor space; as we often say, don’t fight the tape!
- We like the risk-reward towards the SMH ETF into dips below US$600.
