Fabless Focus Drives 54% Rally This Year, Intel Out of the Loop
The VanEck Fabless Semiconductor ETF (SMHX) has surged about 54% year to date through July 2, 2026, underscoring a winner-takes-all moment for chip design firms. Importantly, the fund holds zero shares of Intel, a deliberate design that mirrors the broader industry tilt toward fabless names.
As of the latest trading data, SMHX is up 54.22% year to date and has logged an 87.07% gain over the past year. The fund closed at roughly $58.65 on July 2, 2026, a price that reflects strong demand for AI-focused chip designers and the ongoing transition away from traditional integrated device manufacturers.
What This ETF Owns (And What It Excludes)
SMHX is managed to track a basket of fabless semiconductor companies—designers that outsource manufacturing to foundries such as TSMC. The mandate centers on firms that earn higher margins by leading in chip design while leaving fabrication to others.
Though holdings can shift, the fund’s core tilt typically includes leading designers such as NVIDIA, AMD, Qualcomm, Broadcom, and Arm. The exact weights are disclosed in the fund’s latest holdings report, which investors should review before making decisions tied to position sizing.
- Focus: fabless chip design and AI acceleration processors
- Typical names: NVIDIA, AMD, Qualcomm, Broadcom, Arm
- Management style: passive tracking of a fabless index
The absence of Intel in SMHX isn’t an oversight; it’s a core characteristic. The fund explicitly excludes integrated device manufacturers, preferring designers that rely on external foundries for fabrication.
Why This Rally Is Accelerating This Year
The chip sector split into two camps during the AI surge: fabless chip designers capturing the high-margin value of AI accelerators and data-center processors, while foundries absorb the heavy capital costs of building fabs to meet demand.
Observers point to a few forces fueling the year-to-date performance:
- AI chip demand remains robust, with data-center upgrades and AI inference workloads driving new orders for designer teams.
- Margins in design-centric businesses tend to be higher than pure manufacturing, supporting leadership in stock performance.
- Foundry capacity constraints have cooled some traditional chipmakers, shifting investor interest toward firms with differentiated design capabilities.
From a market perspective, SMHX has rewarded investors who timed the AI-driven rally, delivering a strong return profile so far this year. The one-year performance figure reflects a broader momentum in the fabless segment, which some analysts say is less sensitive to cyclical pricing moves in commodity components.
In the latest trading updates, SMHX’s price action has shown resilience, even as broader tech volatility reappears. Critics caution that the fabless space is heavily tied to AI adoption cycles and supply-chain dynamics, which can reprice quickly in the event of softer demand or regulatory shifts.
Intel Is Not in the Fund—and Why
Intel’s exclusion from SMHX is by design. Intel operates as an IDM—an integrated device manufacturer that designs and fabricates its own chips. That model stands in contrast to the fund’s fabless mandate, which rewards design houses while outsourcing manufacturing to dedicated foundries.
Intel’s quarterly results illustrate the company’s blended strategy. In Q1 2026, Intel reported revenue of $5.421 billion, up 16% year over year, with fabs across the United States, Ireland, and Asia contributing to output. Still, the IDM structure remains divergent from SMHX’s core approach, which concentrates on firms that do not own fabrication facilities.
Investors should note that the broader market for semiconductors is sensitive to capital expenditure cycles among foundries, which can influence the relative performance of fabless names. The contrast between Intel’s integrated model and the fund’s fabless focus is a recurring theme in discussions about this sector and this year’s leadership dynamics.
Market Context: The Chip Rally and Its Risks
The current rally in this segment sits at a pivotal moment for technology equities. AI capacity, cloud adoption, and 5G infrastructure have fueled demand for high-end processors designed by nimble, design-first firms. Yet the environment remains susceptible to regulatory scrutiny, macro surprises, and shifts in supply chain discipline that historically drive volatility in semiconductors.
Investors are weighing several macro factors as they assess this semiconductor this year. Interest-rate trajectories, geopolitical tensions affecting cross-border supply chains, and potential policy changes around export controls could all influence the trajectory of fabless stocks moving forward.
“The year so far has rewarded those who bet on design-led momentum and AI-ready architectures,” said a market strategist who requested anonymity. “But the space is still delicate—any setback to AI deployment or a worsening supply crunch could quickly reframe expectations.”
What Investors Should Watch Next
- Holdings updates: SMHX’s top positions and sector weights can shift, altering risk and return profiles. Review the latest disclosure before trading.
- AI cycle timing: The pace of AI adoption and data-center expansion will influence fabless designer earnings and stock performance.
- Foundry capacity: The health of major foundries and any capacity expansions may indirectly impact fabless firms’ growth potential.
- Regulatory risk: Export controls and technology restrictions could affect access to essential manufacturing equipment and design software.
For traders tracking this semiconductor this year, SMHX’s performance offers a window into a market where design prowess matters more than fabrication assets. The fund’s 54% year-to-date gain through early July 2026 highlights a tactical tilt toward AI-ready designers over traditional manufacturers.
Bottom Line for This Year and Beyond
The trajectory of SMHX illustrates how investors are recalibrating expectations in the semiconductor space. The fabless approach has captured investor enthusiasm by aligning with AI-driven growth and the lower-capital model of outsourcing fabrication. Intel’s IDM framework, while a cornerstone for its business strategy, places it outside the scope of this particular ETF—and outside the fund’s current leadership narrative.
As this semiconductor this year continues to evolve, the conversation among traders, fund managers, and corporate strategists will focus on how AI demand, capital expenditure cycles, and regulatory environments converge to shape the next wave of winners in semiconductors.
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