SOXX beats SMH by 20 points in 2026 as capped weighting outperforms concentration

The mechanism behind semiconductor ETF performance divergence is index construction, specifically how much weight a fund allows any single holding to carry. Cap-weighted funds concentrate assets in the largest names, which amplifies gains when one company leads the group but creates drag when sector leadership spreads. In 2026, leadership broadened across the semiconductor sector, and the iShares Semiconductor ETF (NASDAQ: SOXX) has beaten the VanEck Semiconductor ETF (NASDAQ: SMH) by roughly 20.4 percentage points year to date through August 4.

How the two books differ

SMH is the larger, more widely held fund, built around concentrated exposure to the mega-cap semiconductor complex. According to its May 27, 2026 fact sheet, the top five positions are AMD at 10.33%, Broadcom at 9.57%, Micron at 9.39%, Taiwan Semiconductor at 8.75%, and NVIDIA at 8.4%, with the top 10 combined accounting for roughly 71% of total assets. That construction serves investors well when the largest names outpace the rest of the sector. Expense ratio is 0.35%.

SOXX tracks the NYSE Semiconductor Index with a capped, more evenly distributed methodology. Its top holdings, AMD at 8.57%, NVIDIA at 8.42%, and Micron at 8.21%, sit far closer together. No single stock can dominate returns the way concentration permits in SMH. SOXX carries an expense ratio of 0.33%.

The 2026 performance gap

Through August 4, SOXX returned 80.24% year to date against SMH's 59.86%. The two funds hold largely overlapping portfolios, so the gap is a product of weight allocation, not different stock selection. Mid-cap names like Lam Research at 5.62% and Applied Materials at 5.53% in SMH contributed less to returns than their individual performances warranted because their weights were too small to move the overall fund. In SOXX, those same positions carry more relative influence.

One-year figures show the same pattern in a tighter window: SOXX at 126.59% against SMH at 99%.

Where SOXQ fits in the cost stack

For investors focused on fee drag, the Invesco PHLX Semiconductor ETF (NASDAQ: SOXQ) tracks the PHLX Semiconductor Sector Index at 0.10%, roughly a third of SMH's expense ratio. SOXQ returned 72.20% year to date, sitting between the two larger funds. Its top positions include NVIDIA at 13.30%, Micron at 7.76%, and AMD at 4.20%, giving it higher single-name NVIDIA concentration than either SOXX or SMH.

Holders of SMH in taxable accounts face capital gains exposure before any switch. Redirecting new contributions into SOXX or SOXQ while leaving an existing SMH position in place is one path; swapping inside a tax-advantaged account carries no tax cost. Over five years, SMH returned 339.48% against SOXX's 261.59%, a period when the sector's largest names consistently led. The 80.24% against 59.86% gap through August 4 is what the inverse condition produces.