Forget SMH: The Chip Fund That Charges 0.15% Is Beating It by 22 Points This Year
A smaller, cheaper semiconductor ETF has quietly left the industry's most popular chip fund in the dust this year, and the reason comes down to one name that SMH owns a lot of and its rival barely touches.
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If you own the VanEck Semiconductor ETF (NASDAQ:SMH), you own the default way to bet on the chip cycle. SMH has been the reflexive semiconductor pick for years, and it has done its job: the fund is up 59.47% year-to-date through September 9, 2026. That is a strong number in isolation. It looks less strong when you notice that a much smaller competitor with a different construction has left it well behind over the same stretch, and done so while charging less. The alternative worth considering is the Xtrackers Semiconductor Select Equity ETF (NASDAQ:CHPS).
Year-to-Date Scoreboard
Through the September 9, 2026 session, CHPS has returned 81.52% year-to-date, versus 59.47% for SMH. That is roughly a 22-point gap in eight months, and it stems directly from how the two portfolios are built. SMH holders should understand exactly what they are and are not owning before deciding whether that gap is a signal or simply noise.
SMH Is an NVIDIA Position With a Chip Wrapper
SMH’s June 30, 2026 NPORT filing lists just 26 positions. NVIDIA alone is 17.55% of net assets, and Taiwan Semiconductor Manufacturing is another 9.29%. Those two names drive roughly a quarter of every daily move. That construction is why SMH outperformed during the 2023 to 2024 AI-training buildout, and why it has lagged in 2026 as capital rotated toward memory, back-end equipment, and non-U.S. suppliers.
How CHPS Is Built Differently
CHPS’s May 29, 2026 NPORT snapshot shows 54 positions, with NVIDIA weighted at only 3.40% of net assets. The reporting dates for the two funds differ by roughly a month, so this is not a same-day comparison, but the structural gap is far larger than any monthly drift. Where SMH tops out with U.S.-listed mega-caps, CHPS leans into memory and international equipment: Micron at 6.82%, SK Hynix at 6.80%, Advantest at 2.22%, Tokyo Electron at 2.79%, plus MediaTek, Infineon, VAT Group, ASML, and BE Semiconductor. Those are the pockets of the cycle that led the market this year, and CHPS captured them because it was already built to own them.
Cheaper Fund, Better Year
CHPS also carries the lower headline expense ratio at 0.15%, versus 0.35% for SMH. That inverts the usual setup where the outperforming fund is the pricier one. For SMH holders, it means the fee differential is not a rounding error you accept in exchange for scale. You are paying more to own a more concentrated portfolio that has trailed in 2026.
Counterweight: Size and Concentration Cut Both Ways
SMH is a giant. Its net assets stood at $77.2 billion as of June 30, 2026. CHPS held $89.6 million in net assets as of May 29, 2026. That gap has real consequences. It affects bid-ask spreads on entry and exit, block-trade capacity, and the tail risk that a small fund is shuttered or restructured. It also cuts the other way on returns: the same construction that helped CHPS this year — low NVIDIA weight and heavy memory and equipment exposure — would work against it in an NVIDIA-led leg higher. The 22-point year-to-date gap reflects a factor bet rather than a permanent edge.
How to Think About a Swap
In a taxable account, selling SMH after a 93.43% one-year run likely triggers a meaningful capital gain. A partial rotation, trimming SMH to fund an initial CHPS sleeve, keeps the AI-mega-cap exposure while adding the memory and equipment tilt. In a tax-deferred account, a full swap is cleaner if the diversified construction genuinely fits your view.
Which Fund Fits Which Investor
SMH remains the right vehicle for an investor who wants a liquid, mega-cap, NVIDIA-plus-TSMC expression of the AI chip trade and values scale over breadth (we studied the traits the biggest chip winners shared before their runs and put them in a free playbook you can grab here). CHPS is the better fit for an investor who wants semiconductor exposure without staking a quarter of the portfolio on two names, who is comfortable with a smaller fund’s liquidity profile, and who wants memory and international equipment inside the wrapper. The 2026 scoreboard shows what that trade-off has paid so far. What it will pay next depends on whether the leadership stays where it has been or rotates back to the names SMH owns most.
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Ryne Mauck is an investment writer covering exchange-traded funds, retirement planning, and portfolio strategy. Through his work at 24/7 Wall St. and other investment platforms, including Seeking Alpha, he aims to provide clear, research-driven insights that help investors make more informed decisions while maintaining a long-term approach to investing.
Ryne holds a B.Sc. in Finance and an M.A. in Political Science. He is a formerly registered Municipal Advisor Representative and has passed the Series 50, Series 63, and Series 65 exams. His articles are not intended to be, nor should they be interpreted as, financial advice.
