VanEck Semiconductor ETF shows strong historical returns amid AI chip growth

The VanEck Semiconductor ETF (SMH) has demonstrated significant historical outperformance compared to the S&P 500. Between 2016 and 2025, the fund beat the index in eight out of ten years. Notably, a $1,000 investment in the fund from late 2015 through 2025 would have grown to nearly $15,000, compared to approximately $4,000 in an S&P 500 index fund. However, the fund is subject to high volatility; in 2018 and 2022, its losses were roughly double those of the broader market.

Within the sector, a strategic shift is occurring as investor focus moves toward memory manufacturers like Micron and SK Hynix. These companies are becoming critical due to hardware infrastructure bottlenecks in the expansion of global data centers. While companies like ASML and TSMC face construction delays for new production facilities, memory components have emerged as a primary bottleneck in the AI infrastructure supply chain.

Nvidia remains a central driver for the industry. CEO Jensen Huang has projected a doubling of chip sales volumes by 2027 compared to current levels, a forecast that supports growth expectations for the broader supply chain, including contract manufacturer TSMC.