Quick Read
SMHX is up 58% in 2026 and 90% over the past year as it only owns AI chip developers like NVIDIA, AMD and Qualcomm.
TSMC, a $2.3 trillion foundry company initially excluded from SMHX, is up 49% this year riding the same AI wave.
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VanEck Fabless Semiconductor ETF (NASDAQ:SMHX) is up in 2026, up 58.48% year-to-date through July 6, and doesn’t own any shares of the world’s largest chipmaker. Taiwan semiconductor manufacturing (NYSE:TSM), the foundry that physically produces chips for nearly every semiconductor AI developer, is missing by design. This absence is built into the foundation’s mandate.
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What is SMHX really?
SMHX is VanEck’s Fabless Semiconductor ETF, a relatively young fund that launched around August 2024. As the name suggests, it only owns semiconductor companies, which are firms that design chips but outsource the actual production to third-party factories. Think of the factoryless company as the architect and the foundry as the construction team. SMHX buys architects.
The fund trades on the Nasdaq and closed at $60.27 on July 6, 2026, before falling to $58.48 in the latest session, representing a one-day retracement of 2.97%. Over the past week it has decreased by 2.48%, and over the past month it has remained virtually unchanged at +1.23%. Zoom out and the picture changes: SMHX is up 89.57% over the past year.
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Why is it up
The fabless-less cohort is home to computer-aided design AI. Companies developing GPUs, custom accelerators, mobile system-on-chips and networking chips have seized pricing power in the current cycle because design is what customers pay many times more for. Industry standard names typically associated with non-equity funds (chip designers such as NVIDIA, AMD, Qualcomm, Broadcom and Arm) have ridden the wave of AI capital spending. SMHX’s revenue reflects this concentration at the design level of the semiconductor supply chain.
TSMC Exception Explanation
This is where the fund’s methodology matters. TSMC is the world’s largest dedicated independent (pure-label) semiconductor manufacturing company and contract manufacturer with a market capitalization of approximately $2.34 trillion. It makes chips under contract to developers who don’t have their own manufacturing facilities, rather than selling its own brand of silicon.
The story continues
This makes TSMC the literal opposite of Fables. A fund whose index screens firms that outsource manufacturing inherently cannot hold the company that receives those manufacturing orders. The same logic rules out integrated device manufacturers like Intel, which own their own factories. The SMHX tent is for designers only.
This exception is durable. It withstands quarterly rebalancing because it is built into the index definition itself.
The Irony of Correlated Returns
TSMC is riding the same AI wave as the SMHX designers. The stock is up 49.42% year-to-date and 94.49% over the past year. In the latest quarter, TSMC reported quarterly revenue growth of 35.1% year over year and earnings growth of 58.4%, with analysts forecasting an average price target of $490.34.
Broader semiconductor ETFs that use market cap or industry classification filters tend to keep TSMC in the top five. SMHX shareholders receive designers without the participation of the manufacturer. This is a purer bet on the level of design, and also more concentrated. Excluding a $2 trillion foundry removes a natural diversifier from the portfolio and makes the portfolio more susceptible to design-side dynamics: customer concentration among hyperscalers, competitive pressures between GPUs and custom semiconductor processor development plans, and the pricing power of a handful of intellectual property owners.
Conclusion
SMHX achieved huge profits in 2026 by owning the development of the semiconductor stack. Investors who want exposure to manufacturers, packagers and equipment manufacturers won’t find them here and will need a different vehicle. The fund is young, its expense ratio and assets should be checked on VanEck’s official page before making any allocation decisions, and recent weekly and daily performance suggests the group could pull back sharply.
Past performance is no guarantee of future results and none of this constitutes investment advice. SMHX’s portfolio ownership depends on whether an investor wants to bet solely on the design level or prefers a broader semiconductor activity that includes foundries doing the actual manufacturing.
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