Invesco’s SOXQ provides broader exposure and lower costs, which could influence future performance as market leadership evolves beyond megacaps.

Disclosure notes indicate the authors and Motley Fool hold positions in various semiconductor stocks and related funds, signaling a built-in promotional bias toward the sector.

The story centers on a megacap-led AI infrastructure rally in 2026, with SMH viewed as the preferred single-ETF vehicle to capitalize on the sector due to its concentrated leadership among megacaps.

SMH’s strong performance is driven by megacap leadership, delivering year-to-date gains up to 71% as of mid-June and about 49% in 2025, with an approximate 38% average annual return over the past five years.

Top holdings and weights in SMH are heavily skewed toward Nvidia at roughly 14.5%, Taiwan Semiconductor Manufacturing at about 9.3%, Micron around 8%, Advanced Micro Devices about 7.3%, and Intel around 7.2%.

SMH tracks the MVIS U.S. Listed Semiconductor 25 index, resulting in a top-heavy portfolio concentrated in the sector’s largest names, which together make up roughly a quarter of the fund.

The fund’s market-cap weighting concentrates investments in Nvidia and TSMC, with these megacaps together accounting for about 25% of SMH’s holdings.

SMH remains a market-cap-weighted ETF, focusing on the 25 largest U.S.-listed semiconductors and concentrating around the biggest players.

A key trade-off is concentration versus breadth: SMH offers concentrated megacap exposure, while alternatives like SOXX and SOXQ provide broader exposure to smaller and mid-cap names with different cost structures.

SOXX and SOXQ overlap significantly with SMH, but SOXQ offers a lower expense ratio (0.19%), appealing to cost-conscious investors seeking broader exposure.

The article includes Stock Advisor promotions, calls to action, and disclosures of author and firm positions in related funds, underscoring potential conflicts of interest and promotional framing.

While megacaps have led the current AI rally, there is discussion that gains could broaden as the growth cycle matures and breadth for other stocks increases.