A strong management team and sound investment process underpin SPDR® S&P Semiconductor ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Semtech

Micron Technology

First Solar

Impinj

MACOM Technology Solutions Holdings

Broadcom

Analog Devices

QUALCOMM

Texas Instruments

NVIDIA

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. SPDR® S&P Semiconductor ETF earns an Above Average Process Pillar rating. The largest contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's five-year risk-adjusted success ratio of 58% also supports the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the parent firm's five-year retention rate of 74%, which suggests it could do more to retain its portfolio managers.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the semiconductor segment of a U.S. total market composite index.  In seeking to track the performance of the S&P Semiconductor Select Industry Index (the "index"), the fund employs a sampling strategy. It generally invests substantially all, but at least 80%, and of its total assets in the securities comprising the index. The index represents the semiconductors segment of the S&P Total Market Index ("S&P TMI"). 

 The portfolio is overweight in technology by 21.1 percentage points in terms of assets compared with the category average, and its basic materials allocation is similar to the category. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 9.4 and 4.4 percentage points of assets, respectively. The strategy owns 40 securities and its assets are more dispersed than peers in the category. In particular, 33.8% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the category average's 52.3%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 31% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

State Street’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Kala O’Donnell. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of seven strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR S&P Semiconductor ETF

XSD tracks an equal-weighted index of semiconductor stocks.

XSD ETF provides exposure to U.S. semiconductor stocks with a good level of diversification. The chip industry demonstrates solid momentum and is expected to fully recover its demand profile in 2024. In my view, XSD is a better choice to Buy for those seeking options to limit exposure to top-tier semis and geopolitical tensions.

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Semiconductor stocks outside of Nvidia have not performed well, but there may be a rotation favoring them in the future. The SPDR S&P Semiconductor ETF provides exposure to the semiconductor industry and tracks an equal-weighted index. XSD offers diversification, access to a growing sector, and lower management fees, but also comes with sector-specific and market risks.

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SPDR S&P Semiconductor ETF has surpassed its mid-year high, while iShares Semiconductor ETF lags, but the recent trend shows that it is reversing. SOXX's strong performance is due to its heavy concentration on AI-related stocks like Nvidia, AMD, and Intel together with other big names with recent momentum driven by prospects of exporting advanced chips to China. With 2024 looking to be the year of normalization for the AI theme together with the Fed now appearing more likely to ease monetary policy, XSD's equal-weight approach makes more sense.

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The SPDR S&P Semiconductor ETF has historically outperformed the S&P 500, with a total return of 210% in the past 5 years compared to the S&P 500's 77%. However, XSD displays significantly more volatility than the broader index, with larger fluctuations in its up and down swings. This contributes to its outperformance in bull markets and underperformance in bear markets. Despite a decline in demand for consumer electronics, the fund is expected to benefit from the ongoing US-India partnerships and from extensive investments in India's chip industry.

News for SPDR S&P Semiconductor ETF ETF (XSD)