Ten years ago, the semiconductor industry looked nothing like it does now. The artificial intelligence (AI) boom was still years away, and there was no talk of megacap tech companies spending tens of billions of dollars on AI development.
Investors in the VanEck Semiconductor ETF (SMH -4.06%) 10 years ago may not have known that was coming. But their brokerage account balances sure benefited from it.
Image source: Getty Images.
Over that time frame, this ETF has produced a total return of 1,930%, which translates to roughly 35% annually. That means a $1,000 investment made 10 years ago with dividends reinvested (which are virtually non-existent) would be worth approximately $20,300.
Over that same time frame, the Vanguard S&P 500 ETF earned 14.9% annually, while the Invesco QQQ ETF did approximately 20.6%.
VanEck ETF Trust – VanEck Semiconductor ETF
Today’s Change
(-4.06%) $-22.26
Current Price
$526.29
Key Data Points
AUM
$67B
Dividend Yield
0.21%
Expense Ratio
0.35%
Top Holdings
NVDA
21.21%
TSM
9.20%
AVGO
6.23%
That performance illustrates the potential upside of investing in the right sector at the right time. But the concentration that comes from investing in a single tech subsector means that volatility can be very high. The VanEck Semiconductor ETF has experienced three separate drawdowns of 30% or more just in the 2020s. It was able to generate these substantial returns despite them.
These results are unlikely to carry on indefinitely. But they do show that investing in an industry about to enter a technological revolution can be very lucrative.
David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
