Differences in component caps may favor the iShares Semiconductor ETF amid the ongoing chip sector rally.
The iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) manage over $115 billion combined but differ in portfolio construction. Both are market-cap-weighted but apply distinct caps on holdings, influencing concentration risk.
SMH limits any single component to 20% at rebalance, while SOXX caps its top five holdings at 8% and others at 4%. This results in SMH being more top-heavy, with greater exposure to its largest positions.
Analysts suggest SOXX’s more diversified weighting could reduce volatility and improve performance as the semiconductor rally continues.