The VanEck Fabless Semiconductor ETF (NASDAQ:SMHX) has ripped higher in 2026, gaining 58.48% year to date through July 6, and it does not own a single share of the world’s largest chipmaker. Taiwan Semiconductor Manufacturing (NYSE:TSM | TSM Price Prediction), the foundry that physically fabricates chips for nearly every marquee AI silicon designer, is absent by design. That absence is written into the fund’s mandate by design.
What SMHX Actually Is
SMHX is VanEck’s Fabless Semiconductor ETF, a relatively young fund that launched around August 2024. As the name signals, it holds only fabless semiconductor companies, meaning firms that design chips but outsource the actual manufacturing to third-party fabs. Think of a fabless company as the architect and a foundry as the construction crew. SMHX buys architects.
The fund trades on Nasdaq and closed at $60.27 on July 6, 2026, before slipping to $58.48 in the most recent session, a 2.97% single-day pullback. Over the trailing week it is down 2.48%, and roughly flat over the trailing month at +1.23%. Zoom out and the picture changes: SMHX is up 89.57% over the past year.
Why It Is Up
The fabless cohort is where AI compute design lives. Companies that engineer graphics processors, custom accelerators, mobile system-on-chips, and networking silicon have captured the pricing power in the current cycle, because designs are what customers pay premium multiples for. The industry standard names typically associated with fabless funds (chip designers such as NVIDIA, AMD, Qualcomm, Broadcom, and Arm) have all ridden the AI capex wave. SMHX’s returns reflect that concentration in the design layer of the semiconductor supply chain.
The TSMC Exclusion, Explained
Here is where the fund’s methodology matters. TSMC is the world’s largest dedicated independent (pure-play) semiconductor foundry, a contract manufacturer with a market capitalization of roughly $2.34 trillion. It builds chips on contract for the fabless designers rather than selling any of its own branded silicon.
That makes TSMC the literal opposite of fabless. A fund whose index screens for firms that outsource manufacturing cannot, by construction, hold the company that receives those manufacturing orders. The same logic excludes integrated device manufacturers like Intel that own their own fabs. SMHX’s tent covers designers only.
This exclusion is durable. It holds through quarterly rebalances because it is baked into the index definition itself.
The Irony of Correlated Returns
TSMC is riding the same AI wave as the designers SMHX owns. The stock is up 49.42% year to date and 94.49% over the trailing year. TSMC’s most recent quarter posted quarterly revenue growth of 35.1% year over year and earnings growth of 58.4%, with analysts carrying an average price target of $490.34.
Broader semiconductor ETFs that use market-cap or industry classification screens tend to hold TSMC as a top-five position. SMHX shareholders get the designers without the manufacturer. That is a cleaner bet on the design layer, and also a more concentrated one. Excluding a $2 trillion foundry removes a natural diversifier and leaves the portfolio more exposed to design-side dynamics: customer concentration among hyperscalers, competitive pressure between GPU and custom-silicon roadmaps, and the pricing power of a handful of intellectual property owners.
The Takeaway
SMHX has delivered outsized returns in 2026 by owning the design side of the semiconductor stack. Investors who want exposure to the manufacturers, packagers, and equipment makers will not find them here and will need a different vehicle. The fund is young, its expense ratio and holdings should be verified on VanEck’s official page before any allocation decision, and recent weekly and daily action shows the group can pull back sharply.
Past performance does not guarantee future results, and none of this is investment advice. Whether SMHX belongs in a portfolio depends on whether an investor wants a pure design-layer bet or prefers a broader semiconductor exposure that includes the foundries doing the actual fabrication.
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