Prediction: SOXX Will Continue to Outperform SMH. Here's Why.
2026-08-26 11:34
•Dana George •The Motley Fool
•••• •••• Axe Cap view
Why SOXX Beats SMH and What It Means for Rand Investors
SOXX’s balanced semiconductor ETF approach reduces risk compared to SMH’s concentrated bets, an edge worth noting for those watching USD/ZAR.
SOXX’s strategy of capping individual holdings at around 9% means it avoids the sharp swings that come with having one stock dominate your returns. SMH, with over 30% in just two names, carries bigger single-stock risk. For a South African investor, this matters because much of the chip sector’s volatility hits the USD, which flows through to the rand. When individual tech giants stumble, the rand often takes a hit, dragging down USD/ZAR. Holding a diversified ETF like SOXX could cushion against these shocks. Nvidia’s prominence in SMH is a double-edged sword—it can drive gains but also expose you to steep drops if Nvidia falters. If the semiconductor industry stays healthy, SOXX should outperform. But if a few big tech names rally hard, SMH could catch up. this is just our opinion and not financial advice
Position in SOXX rather than SMH to benefit from more balanced exposure to semiconductor growth while managing single-stock risk through the rand. Keep an eye on USD/ZAR moves as a key risk factor.
- SOXX
- SMH
- USD/ZAR
- Breakout rally in a few large semiconductor stocks could favor SMH
- Sudden rand weakness inflating USD/ZAR volatility linked to tech market shocks
6/10
SOXX semiconductor ETF is outperforming SMH by 16.54 percentage points YTD due to its more balanced portfolio structure. While SMH concentrates over 30% in its top two holdings, SOXX keeps no single stock above 9%, reducing risk and positioning it better to benefit from broad chip industry growth while limiting downside if major players stumble.
Our take is based on reporting first published by The Motley Fool.