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Why invest in semiconductors

Semiconductors, the crucial components driving artificial intelligence (AI), electric cars and cloud computing, are becoming increasingly valuable in this digital age.

Why choose VanEck’s semiconductor ETF?

Rather than attempting to pick individual winners in this ever-evolving sector, the VanEck Global Semiconductor ETF (SMHG) provides exposure to the top global semiconductor companies, spanning the entire industry value chain from chip design manufacturers and equipment firms. 

Globally VanEck runs the world’s largest semiconductor ETF (NASDAQ: SMH), which is also listed on various exchanges around Europe. The firm also runs other semiconductor-specific ETFs such as the VanEck Fabless Semiconductor ETF (NASDAQ: SMHX) and VanEck China Semiconductor ETF (NASDAQ: SMHC)

What are the types of companies in SMHG?

The VanEck Global Semiconductor ETF (SMHG) includes companies from around the globe and invests across the value chain. This includes:

1. Foundry Operators (e.g., Taiwan’s TSMC) - Manufacture chips to client specifications
2. Integrated Device Manufacturers (IDMs) (e.g., US’s Intel) - Handle design, manufacturing, and packaging in-house
3. Fabless Companies (e.g., US’s NVIDIA and AMD) - Focus solely on design, outsourcing fabrication
4. Equipment Manufacturers (e.g., Dutch ASML) - Supply the tools and machinery for chip production

As global industry leaders in semiconductor investing, we are excited to bring this opportunity to Australian investors.

What is the long-term investment outlook for semiconductors?

We think, the long-term growth outlook for semiconductors remains strong. Digital transformation across industries from automotive to industrial automation continues to expand the demand for processing, storage, and connectivity. Technologies such as 5G, quantum computing and AI all rely heavily on increasingly advanced and energy-efficient chips.

Graphics Processing Units (GPUs), once primarily used for gaming, are now pivotal in artificial intelligence and machine learning applications due to their high parallel processing capabilities. As AI becomes more embedded in everything from enterprise software to healthcare diagnostics, the importance of semiconductors and their diversity is only growing.

Policy support, such as the US CHIPS Act and similar initiatives around the world, continues to boost domestic production and R&D, helping diversify supply chains and support long-term innovation.

Semiconductors and the AI boom

There is no doubt that companies involved in semiconductors have benefited from the recent AI boom. GPUs power AI workloads by executing many simultaneous computations required for training complex models. As AI continues to expand into areas like autonomous driving, robotics, and finance, the need for performance-optimised chips grows.

Simultaneously, AI is revolutionising how chips are designed. AI-assisted design tools are enabling breakthroughs beyond traditional Moore's Law scaling, creating more application-specific architectures that maximize performance and efficiency.

In summary, AI depends on semiconductors to function, and semiconductors are evolving faster thanks to AI.

AI infrastructure also benefits the broader semiconductor ecosystem including memory, power management, networking, and packaging underscoring the comprehensive impact of this trend across the value chain.

Will the demand for semiconductors continue?

Across every industry from finance and biotech to entertainment and national defence the need for faster, smarter, and more efficient computing is intensifying. The AI revolution has only accelerated this trend, creating a flywheel effect of model complexity, data growth, and infrastructure expansion.

To meet this insatiable appetite for compute, modern systems require an entire ecosystem of semiconductors working in harmony. This includes:

• High Bandwidth Memory (HBM): Feeding massive datasets into accelerators
• Networking & Interconnect Chips: Moving data swiftly between nodes in AI clusters
• Power Management & Analog ICs: Optimizing energy usage at scale
• Advanced Packaging & Back-End Equipment: Pushing physical limits for performance and density

What makes this trend so compelling is its durability. Semiconductor demand is not tied to one product cycle or hype phase. It's a foundational requirement for digital transformation in nearly every domain. Whether training trillion-parameter AI models, simulating protein folding, or delivering real-time cloud services, the need for semiconductors is only deepening.

The SMHG opportunity

Powering the technology revolution

Semiconductors are the foundational building blocks of modern technology.

Targeted access to a generational inflection point

An international exposure to the AI, cloud, electrification and automation megatrends fuelling insatiable demand for faster, more energy-efficient chips.

Access all stages of the value chain

Gain exposure to chip designers, manufacturers and equipment firms through a single portfolio.

Key risks:

An investment in our Megatrends ETFs carries risks associated with: ASX trading time differences, financial markets generally, individual company management, industry sectors, foreign currency, country or sector concentration, political, regulatory and tax risks, fund operations and tracking an index. See the PDS and TMD for more details once available on vaneck.com.au