SMH Returned 44.09% Over the Past Year. First Trust’s Chip Fund Returned 67.35%.
A smaller, lesser-known chip ETF has been quietly outpacing the most popular semiconductor fund in the market, but the longer you zoom out, the more complicated that story gets.
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For most investors, the VanEck Semiconductor ETF (NASDAQ:SMH) is a popular way to own semiconductor stocks. It held $66.44 billion in total net assets as of October 30, 2026, and it has paid back holders with a 44.09% total return over the past year through the Friday, October 30 close. A smaller rival did better. The First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL) returned 67.35% over the same stretch, a lead of 23.26 percentage points over SMH. Both one-year windows begin on October 30, 2025, and both figures assume distributions were reinvested. SMH turned a $100,000 stake into $144,090. The same amount in FTXL grew to $167,350.
First Trust Holds a Wide Lead in 2026
The gap holds up on a calendar-year basis too. Through the October 30 close, FTXL is up 63.18% year to date against 45.08% for SMH, a lead of 18.1 percentage points. Investors who bought either fund in January captured far more of this year’s chip rally through the First Trust fund. Shares closed Friday at $211.33 for FTXL and $522.49 for SMH.
Five- and Ten-Year Returns Strongly Favor SMH
Over longer periods, the ranking flips. In the five years starting October 29, 2021, SMH returned 293.58% while FTXL returned 210.27%, an advantage of 83.31 percentage points for the VanEck fund. Measured in dollars, $100,000 in SMH became $393,580, while the same stake in FTXL became $310,270.
The ten-year record leans even further toward SMH. Since November 1, 2016, SMH has returned 1595.48%, compared with 1024.25% for FTXL, a gap of 571.23 percentage points. SMH’s long-run lead is far larger than the First Trust fund’s recent lead. Holding SMH for five or ten years did much better than holding FTXL. First Trust’s appeal rests on recent results alone.
A Sharp One-Month Drop Hit Both Funds
The two funds dropped sharply over the past month. FTXL lost 16.52%, and SMH lost 14.21%, which left the VanEck fund ahead by 2.31 percentage points for the month. Semiconductor funds can drop hard in short periods, and FTXL’s recent lead came with that volatility. FTXL’s recent drop shows the downside risk that comes with its gains.
Same Industry, Different Rulebooks
Both funds own semiconductor companies. They follow different indexes, though, and those indexes use different rules to choose and weight stocks, which is why their returns vary.
VanEck says the VanEck Semiconductor ETF aims to give investors exposure to the most liquid U.S. listed semiconductor companies as identified by its index provider. Its benchmark is built around the 25 largest and most liquid U.S.-listed chip companies. In plain terms, size and trading activity decide which stocks make the cut.
According to First Trust, the First Trust Nasdaq Semiconductor ETF seeks to track the Nasdaq US Smart Semiconductor Index. Nasdaq describes that index as one that screens U.S. semiconductor companies on three factors (volatility, value, and growth), then applies a modified factor-weighted method to the selected stocks. FTXL’s index picks and sizes chip stocks by a scoring system, so the portfolio can look quite different from SMH’s even though both funds cover the same industry.
Tax Costs Can Erase the Gains From Switching
In a taxable brokerage account, selling SMH after a strong run likely creates capital gains, and shares held a year or less are taxed at ordinary income rates. That tax bill comes straight out of any edge FTXL might deliver. Inside an IRA or other tax-advantaged account, a swap triggers no immediate tax. Directing new contributions rather than selling existing shares is one way to add exposure to a second fund without triggering capital gains.
What to Watch Next
FTXL’s factor-driven index and its recent 16.52% one-month drop make the coming months a test of whether its lead holds. Investors should watch index rebalances, which can reshape FTXL’s factor-weighted lineup and SMH’s roster of the largest chip stocks, along with sector drivers such as chipmaker earnings and demand trends. Readers looking to round out chip exposure with the suppliers supporting the same expansion (power, cooling, networking) can see the seven names we pulled together in a free AI infrastructure report here. SMH’s five- and ten-year records remain the bar FTXL must clear.
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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.
