Find the Next NVIDIA With This Semiconductor ETF

The AI trade proved its worth again last year, as tech stocks finished with a more than 22% gain. That led to the sector outperforming the broad S&P 500 for the 11th time in the past 12 years.   

When it comes to pure-play AI stocks, NVIDIA (NASDAQ: NVDA) receives the lion’s share of attention. The Magnificent Seven mainstay and the largest publicly traded company by market cap gained nearly 36% in 2025, and is up 1,336% over the past five years.

However, despite its accolades, NVIDIA actually played second fiddle to another AI-leveraged semiconductor company last year: Micron Technology (NASDAQ: MU), which arguably won 2025’s AI race with an impressive gain of more than 235%. 

But for investors on the hunt for the next big semiconductor stock, the best approach likely is not putting your hopes into one individual company. Rather, a thematic ETF that provides exposure to the broad industry may be the key to identifying up-and-coming semi stocks.

The U.S. Semiconductor Market Is Rapidly Expanding

According to industry consultancy firm Grand View Research, the U.S. semiconductor market size, which was estimated at $9.17 billion in 2024, is forecast to grow at a compound annual growth rate (CAGR) of 7.3% from 2025 through 2030. 

Grand View’s report noted that much of that growth will be driven by rising demand for applications in wired and wireless communications, consumer electronics, industrial electronics, automotive electronics, computing, and data storage among others. 

Specific to the United States, the report finds that the “semiconductor devices industry is witnessing a surge in the adoption of artificial intelligence (AI) and Internet-of-Things (IoT)-driven chip designs.” 

Those findings are underscored by a McKinsey report published in November 2025 that found that by 2030, the global semiconductor market could be worth as much as $1 trillion, with the United States accounting “for 30% of advanced-node semiconductor fabrication capacity.”

However, amid a landscape rife with startups looking to take market share from dominant players like NVIDIA and Micron, picking the next big winning semiconductor stock is akin to taking a shot in the dark. 

But for ETF investors, one fund’s holdings have the ability to indicate which companies are most likely to come out on top. 

A One-Stop-Shop Thematic Semiconductor ETF

The SPDR S&P Semiconductor ETF (NYSEARCA: XSD) provides broad exposure to the industry. Managed by State Street, the fund “allows investors to take strategic or tactical positions at a more targeted level than traditional sector-based investing.”

The XSD commands $1.61 billion in assets under management while carrying a net expense ratio of 0.35%, which is nearly offset by its dividend, which currently yields 0.25%, or 82 cents per share annually.  

What may come as a surprise to many is that while NVIDIA is part of the XSD’s holdings, by weight it only ranks 19th. That is because the passively managed fund aims to replicate, as closely as possible, the performance of the S&P Semiconductor Select Industry Index. 

That benchmark is a modified equal weight index, meaning that despite beginning as an equally weighted index, it can cap allocations of the largest stocks in order to ensure smaller companies receive significant and warranted exposure.

Currently, that index favors companies like Micron, Rigetti Computing (NASDAQ: RGTI), Intel (NASDAQ: INTC), SiTime (NASDAQ: SITM), and MACOM Technology Solutions (NASDAQ: MTSI), which together comprise the ETF’s top-five holdings. For good measure, Advanced Micro Devices (NASDAQ: AMD), which gained nearly 79% last year, comes in with the sixth largest allocation.  

The XSD’s Strong Performances Are Likely to Continue 

In 2025, the ETF gained more than 29%—better than the tech sector (22.3%) as well as the broad S&P 500 (17.51%).

Given the semiconductor industry’s numerous tailwinds heading into the new year, it isn’t surprising that Wall Street expects another strong performance in 2026. 

Based on 675 analyst ratings of the top 25 companies in the SPDR S&P Semiconductor ETF—or more than 75% of its portfolio—the fund receives a Moderate Buy rating, with the majority of its holdings receiving Moderate Buy, Buy, or Strong Buy ratings, and only one company receiving a Sell rating. 

Underscoring Wall Street’s view of the XSD, current short interest heading into 2026 stands at just 2.22% of the float, or $34 million worth of shares, markedly down from the $4.97 billion worth of shares that were shorted on June 30. 

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The article "Find the Next NVIDIA With This Semiconductor ETF" first appeared on MarketBeat.