VanEck Semiconductor ETF (SMH) Holdings and Performance Recap

SMH Performance Overview for Q3 2023

View Q2 2023 SMH performance overview here.

VanEck Semiconductor ETF had a weaker performance in Q3 of 2023 versus the prior quarters, down -5.5% over that time period. Performance was largely down for the majority of the portfolio, with exposure to NVIDIA Corp. ($NVDA) being one of the few positive contributors over the quarter. Semiconductors continue to be a primary driver of technological innovation globally, whether it's complex systems on a chip or basic memory and components, we believe the sector is a long-term trend that investors should consider.

SMH Top Holdings

These are not recommendations to buy or to sell any security. Securities and holdings may vary. For a complete list of fund holdings, please visit vaneck.com/smh.

Top Two Contributors for SMH in Q3 2023

NVIDIA Corp. (NVDA) – 18.65% Weight | 0.49% Contribution to return

In Q3 2023, NVIDIA reported earnings per share (EPS) of $4.02, reflecting a significant increase from the corresponding period in the previous year. The company's total revenue for the quarter was $18.12 billion, a 206% increase year-over-year and a 34% rise from the previous quarter. This growth was primarily attributed to the Data Center sector, which reported a record revenue of $14.51 billion, marking a 279% increase from the previous year. The Gaming sector also showed substantial growth, with revenue rising to $2.86 billion, an 81% increase year-over-year. Additionally, the Professional Visualization and Automotive sectors reported revenues of $416 million and $261 million, respectively.

For the upcoming quarter, NVIDIA projects revenues of around $20 billion. This forecast reflects the company's strong performance across various sectors, particularly in Data Centers and Gaming. NVIDIA's focus on accelerated computing and generative AI, as discussed by CEO Jensen Huang, is in line with the current trends in the industry. This strategic direction positions NVIDIA for continued growth in the context of the global economic environment.

Intel Corporation (INTC) – 4.71% Weight | 0.24% Contribution to return

In the third quarter of 2023, Intel Corporation reported a revenue of $14.2 billion, marking an 8% decrease from the same period in the previous year. The non-GAAP earnings per share (EPS) for the quarter was $0.41, showcasing an upward trend from the previous year's figures. This revenue decline reflects challenges across various business units, with the Client Computing Group (CCG) seeing a 3% decrease in revenue, the Data Center and AI (DCAI) unit experiencing a 10% drop, and the Network and Edge (NEX) unit facing a significant 32% decrease. However, there were positive developments as well, with Mobileye's revenue increasing by 18% and Intel Foundry Services (IFS) achieving an impressive 299% increase in revenue year-over-year.

Top Two Detractors for SMH in Q3

Taiwan Semiconductor Manufacturing Co. (TSM) – 11.02% Weight | -1.71% Contribution to return

Following Q3 reporting of 2023, Taiwan Semiconductor Manufacturing Company Limited (TSMC) reported a revenue of $17.28 billion, which was a 14.6% decrease year-over-year but a 10.2% increase from the previous quarter. The company's net income for the quarter increased by 16.1% quarter-over-quarter to $6.521 billion, and the gross margin for the quarter was 54.3%.

Despite the year-over-year revenue decline, TSMC's performance in advanced technology segments remained strong. The 3-nanometer process technology contributed 6% of wafer revenue, while 5-nanometer and 7-nanometer technologies accounted for 37% and 16%, respectively. In terms of revenue contribution by platform, High-Performance Computing (HPC) increased by 6% quarter-over-quarter to account for 42% of TSMC's third-quarter revenue. The smartphone segment also saw a significant increase, growing 33% to account for 39% of the revenue.

Looking forward to the fourth quarter of 2023, TSMC expects revenue to be $19.6 billion. Gross margins are anticipated to be between 51.5% and 53.5%, with operating margins expected to be between 39.5% and 41.5%. Analysts project that TSMC will return to 22% EPS growth in 2024, despite the current challenges, based on the company's historical performance and potential demand recovery.

ASML Holdings (ASML) – 4.91% Weight | -0.98 Contribution to return

In Q3 2023, ASML Holding N.V. reported mixed financial results. The company's earnings per share (EPS) of €4.81 exceeded expectations by €0.12, but its revenue of €6.67 billion fell short of the consensus estimate of €6.96 billion. This discrepancy was largely due to ongoing supply chain challenges and uncertainty in customer demand for semiconductors. These issues have impacted ASML's ability to deliver products timely, increasing costs and creating demand uncertainty. In response, ASML is investing in new manufacturing capacity and working closely with suppliers and customers to improve component lead times and production schedule visibility.

Despite these near-term challenges, ASML's outlook remains positive, with the company on track to achieve a 30% growth for the entire year, in line with its guidance and historical seasonality. However, while there was a slight improvement in margins compared to Q3 2022, these gains were not sufficient to offset the current headwinds, preventing a significant improvement in overall margins. The company's long-term investment thesis remains robust, but the near to mid-term challenges suggest a cautious approach for the immediate future.

Standardized Performance

The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.

The "Net Asset Value" (NAV) of a Fund is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV.

^* Van Eck Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least February 1, 2024. “Other Expenses” have been restated to reflect current fees.

Q2 2023 VanEck Semiconductor ETF (SMH) Holdings and Performance Recap

Review the top contributors and detractors that led to the SMH ETF’s strong performance in Q2 2023.

SMH Performance Overview for Q2 2023

VanEck Semiconductor ETF has had strong performance in Q2 of 2023, up 15.78% over that time period. Performance was largely due to exposure to NVIDIA Corp. ($NVDA) and their exposure to the growing GPU demand for Artificial Intelligence models. Semiconductors continue to be a primary driver of technological innovation globally, whether its complex systems on a chip or basic memory and components, we believe the sector is a long term trend that investors should consider.

SMH Top Holdings

These are not recommendations to buy or to sell any security. Securities and holdings may vary. For a complete list of fund holdings, please visit vaneck.com/smh.

Top Two Contributors for SMH in Q2 2023

NVIDIA Corp. (NVDA) – 15.86% Weight | 7.57% Contribution to return

In the second quarter, Nvidia exceeded expectations, achieving an EPS of $2.70 (surpassing predictions by 62 cents) and recording total sales of $13.51 billion, significantly surpassing anticipated figures. This notable success was driven by robust sales in data centers, which outperformed expert estimates by almost 30%, alongside elevated sales in the Gaming and ProViz sectors.

Their forthcoming quarter forecasts appear promising, with anticipated sales reflecting a 27% increase, augmented profitability per sale, and prudent operational spending. Market analysts responded favorably to these outcomes, revising their forward expectations for Nvidia upwards. Acknowledging Nvidia's adept performance in data centers and enhancing the gaming domain, they highlighted the company's strategic efforts to meet escalating demand by diversifying its product portfolio. However, a degree of caution was expressed due to potential challenges related to chip sales in China and subdued performance in the automotive sector.

Broadcom Inc. (AVGO) – 5.07% Weight | 1.72% Contribution to return

In Q2, Broadcom exceeded expectations with revenue up 3.5% and earnings per share (EPS) beating forecasts by 2.0% or $0.30. Analysts were upbeat about strong Networking growth driven by AI demand, boosting the Semi business before the iPhone refresh. Positive factors include an Apple deal, projected AI revenue increase, and optimism about deal closures. This led to raised estimates and a higher average price target of $847.31.

Top Two Detractors for SMH in Q2

QUALCOMM Inc. (QCOM) – 4.41% Weight | -0.58% Contribution to return

Following Qualcomm's Q3 report, shares fell broadly. The company's revenue of $8.44 billion was 0.8% below expectations, while EPS of $1.87 exceeded predictions by $0.06. Across its segments, QCT's (technology business) revenue was below target but EBT (earnings before taxes) was in line, while QTL (licensing business) missed on both revenue and EBT. The management's Q4 guidance indicates that the midpoint of their revenue and EPS goals is below the previous consensus. Analysts have generally labeled the Q3 results and outlook as disappointing, citing challenges from China, Huawei, and inventory adjustments that had a greater impact than anticipated. Despite this, some analysts find the valuation favorable and remain optimistic about the company's longer-term prospects.

STMicroelectronics (STM) – 2.03% Weight | -0.33 Contribution to return

STMicroelectronics reported strong earnings and guidance, the company anticipates gross margin pressures in the second half of 2023, with a full-year gross margin guidance of 47-48%. During their quarterly earnings call, management highlighted three key factors contributing to this pressure: increased manufacturing input costs, less optimized production levels in consumer and personal electronics, which is expected to be a $0.5 billion headwind in the second half, and the impact from the ramp-up of 300-millimeter graph as it enters the cost of goods sold. However, the company expects a positive contribution to the gross margin in 2024. Additionally, by the end of 2023, the company anticipates its number of days of inventory to be between 105-110 days, which is slightly higher than the year-end 2022 figures.

Standardized Performance

The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.

The "Net Asset Value" (NAV) of a Fund is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV.

^* Van Eck Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least February 1, 2024. “Other Expenses” have been restated to reflect current fees.

For more information on the VanEck Semiconductor ETF (SMH) please read the Fund FAQ.

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