Semiconductor ETFs Are Falling

Stocks advanced marginally and bonds slipped this week. Last week, I discussed how "sell in May and go away" is not really working out just yet.

A Look at the Market

The S&P 500 has returned 13.5% with dividends included, and the price is up 12.9% for SPDR S&P 500 ETF (SPY) in 2026 so far. This leaves the market on track to post a return for the full year right at 20%. At the same time, iShares Core US Aggregate Bond ETF (AGG) has declined in price in 2026. With dividends included, the return has been -0.3%, which is well below cash.

While stocks are up in Q3 so far with less than four weeks to go, the big winner of the year, semiconductors, is down big. My list of 88 ETFs that I follow closely includes two, and they are both down doube-digit:

Year-to-date, both have soared, with VanEck Semi ETF (SMH) returning 57.5%, and iShares Semiconductor ETF (SOXX) up 72.6%. I compared these two ETFs in June in an article at Seeking Alpha about how the party for semiconductor stocks may be over. Both of these ETFs have moved lower, though they remain the two best ETF returns year-to-date despite the rest of the market advancing since then.

As I pointed out in the Seeking Alpha article, NVIDIA (NVDA), which is the largest stock in the S&P 500 and the NASDAQ 100, it is not the largest name in SOXX. SMH has a lot more of NVDA than SOXX does. According to VanEck, NVDA represented 23.8% of the ETF as of September 3rd. There were five names above 5%. Here are the top 10 names in SMH:

SOXX also has five names above 5%, and four are among the largest in SMH:

These two ETFs cover the same space, but they don't have the same names. The top ten in SMH include three that are not among the top ten in SOXX, though they are in it. The top five names in SOXX represent about 40% of the ETF, which is concentrated, but SMH, with its massive exposure to NVDA, has about 50% in its top five.

NVDA has been volatile, but it is very close to its all-time high, yet it is up "only" 23.3% year-to-date. Of course, it is up a lot more over the past several years. Since June 1st, when my article was published, it has advanced despite the weakness in the sub-sector. Here are the top five names for both ETFs along with SMH and SOXX since then:

NVDA is the only semiconductor stock to rally, and Intel and Broadcom have declined by more than SOXX and SMH Since the end of 2022, Micron Technology (MU) has been the strongest of these, and NVDA and two others have outpaced the ETFs. Only Intel has lagged, though it is up a lot more than the S&P 500, which has gained 101.3%:

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NVDA reported a very strong Q2, and the stock rallied sharply, but it remains below its all-time high set in May. Semiconductor stocks are a big part of the Technology sector and are a large part of the S&P 500. I continue to believe that investors should be cautious.

ETF Model Portfolio Update

This ETF model portfolio, which is measured against 60% SPY and 40% AGG, is up relative to its benchmark. This week, I did one trade again, which was published on here instead of on my Seeking Alpha blog. For those who would like real-time alerts (free of charge for now), just subscribe to the blog.

I posted no articles on ETFs or stocks this week, though I did provide an update of August here.

Going into the week, my model portfolio equity exposure totaled 30.9%, spread out across two ETFs. Here is what I did this week:

• Tuesday: I reduced Vanguard Short-Term Inflation-Protected Securities Index ETF (VTIP) and added to ProShares Russell 2000 Dividend Growers ETF (SMDV).

• Wednesday: I sold more VTIP and added to ProShares S&P MidCap 400 Dividend Aristocrats (REGL).

  
  

Here is the current model portfolio, which now has 37.1% equity exposure in two ETFs and fixed income exposure in three TIPS ETFs that total 62.8%:

I have been wrong this year, at least so far, as stocks keep rallying. The rally had been until Friday thirteen weeks ago (June 5th), when stocks had their worst day of the year. Since then, the S&P 500 and the Russell 2000 have made new highs. Despite being underweight stocks all year, my return relative to the 60/40 index is higher by about 3.8% in just over eight months. As the S&P 500 rose this week and the Aggregate Bond Index fell slightly, the model portfolio, which was down slightly, underperformed the index.

The year-to-date strong relative performance is not due to superior returns on my current equity ETFs. My TIPS ETFs have done okay relative to AGG, but they aren't exactly boosting the return. VGSH isn't helping too much either. So, what has it been? I have had positive returns from three ETFs, two of which I no longer hold and one of which is down a lot year-to-date that I just repurchased recently, and there has been some good trading.

How I Can Help You

I enjoy analyzing ETFs and stocks, and I like sharing my thinking in writing. I was considering starting a subscription service or joining one that is already being published. What things would you as an investor like to see offered?

If you are an investment professional, I would like to work with you as well. I can help educate financial consultants about the ETFs, and I can work with management at investment firms to help create model portfolios or potential ETF investments. Please let me know if your firm would be interested in this.

My ETF articles at Seeking Alpha, written under the alias The Intelligent ETF Investor, shared a lot of my ideas. I continue to share those ideas here on this blog.