Ten years ago, the semiconductor industry was at a different juncture, unaware of the impending AI boom that would trigger immense investments from megacap technology firms. The growth trajectory of the VanEck Semiconductor ETF (SMH) reflects this shift, boasting a staggering 1,930% total return, equating to approximately 35% annually. A $1,000 investment made a decade ago would now be worth around $20,300 when reinvesting dividends, which are negligible.
In comparison, the Vanguard S&P 500 ETF achieved 14.9% annual growth, while the Invesco QQQ ETF garnered about 20.6% within the same timeframe. This remarkable performance underscores the advantages of investing in a sector poised for technological evolution, despite the inherent volatility. The VanEck Semiconductor ETF has endured significant drawdowns—three separate instances where losses exceeded 30% in the 2020s—yet continued to deliver substantial returns.
While such results may not be sustainable indefinitely, they illustrate the lucrative potential of investing in industries on the brink of technological revolution.
