New ETF Stars Emerge: 3 Outperformers and 2 Potential Risers to Watch
A narrow Nasdaq index fund, a top 20 S&P 500 ETF, and a new fabless semiconductor ETF lead the pack in 2024's dynamic market
(1) What's the buzz?
Five new ETFs have made their debut in the autumn of 2024, capturing investors' attention with their innovative approaches and targeted market exposure. BlackRock's iShares brand leads the pack with four new offerings, while Van Eck rounds out the group with a specialized fund.
The iShares Nasdaq 100 Top 30 ETF is a new offering that focuses on the cream of the crop within the tech-heavy Nasdaq 100 index. This fund narrows down the already selective Nasdaq 100 to its top 30 constituents by market capitalization, exposing investors to the market's largest and most influential technology and growth companies.
The iShares Top 20 ETF is another new offering from BlackRock's iShares brand, focusing on the largest companies in the S&P 500 index. This fund provides investors with exposure to the 20 biggest companies by market capitalization within the S&P 500
The VanEck Fabless Semiconductor ETF investment approach focuses exclusively on fabless semiconductor companies – firms that design, develop, and market chips while outsourcing their actual manufacturing to third-party foundries, like Taiwan Semiconductor. SMHX tracks the MarketVector US Listed Fabless Semiconductor Index. This model requires companies to generate at least 50% of their revenue from fabless semiconductor operations.
The iShares A.I. Innovation and Tech Active ETF focuses on capturing opportunities in the rapidly evolving artificial intelligence and technology sectors. It aims to expose investors to a concentrated portfolio of 20-40 global AI and technology stocks across all market capitalizations. The fund targets companies generating revenue from various layers of the AI stack, including AI infrastructure, intelligence, and applications.
The iShares Technology Opportunities Active ETF aims to achieve long-term capital appreciation by investing in global technology companies across the semiconductors, software, and hardware sectors.
(2) iShares Nasdaq 100 Top 30 ETF
The iShares Nasdaq Top 30 Stocks ETF (ticker: QTOP) is designed to provide exposure to the 30 largest companies by market capitalization within the Nasdaq-100 Index.
This ETF is structured to emphasize mega-cap growth by focusing on established leaders primarily in the technology sector, though it includes companies from other non-financial sectors.
QTOP is particularly suited for investors seeking a targeted, large-cap, technology-focused portfolio that reflects the growth potential of prominent Nasdaq firms. Critical attributes of QTOP include:
Holdings and Allocation: It includes 31 holdings (as of October 25, 2024), emphasizing leading companies such as Apple, Nvidia, and Microsoft (top three holdings).
Expense Ratio: The fund maintains a competitive expense ratio of 0.20%, making it cost-effective for gaining large-cap Nasdaq exposure.
Dividend Distribution: Dividends are distributed quarterly, which benefits income-focused investors.
Performance Metrics: The fund’s high price-to-earnings (P/E) ratio of around 39.75 reflects the high-growth profile of its holdings.
Rebalancing: The iShares Nasdaq Top 30 Stocks ETF (QTOP) rebalances quarterly, aligning with its benchmark, the Nasdaq-100 Top 30 Index.
Holdings: The holdings are weighted based on market value, with a capping structure to avoid over-concentration in a few names.
This ETF launched in October 2024 and is traded on the NASDAQ, with a strong emphasis on high liquidity and low bid-ask spreads, typically at around 0.04%
(3) iShares Top 20 ETF
The iShares Top 20 U.S. Stocks ETF offers access to the 20 largest U.S. companies in the SP 500.
iShares Top 20 U.S. Stocks ETF (TOPT)
Fund Objective: Invests in the 20 largest U.S. companies by market capitalization within the S&P 500 index.
Number of Holdings: 20.
Top Three Holdings: Apple (AAPL), Nvidia (NVDA), and Microsoft (MSFT).
Expense Fee: 0.20%.
The top 20 companies in the S&P 500 have contributed to more than two-thirds (appr. 68 %) of the index's returns over the past three years.
TOPT’s portfolio is updated quarterly on the third Friday of March, June, September, and December, ensuring it reflects the latest large-cap market leaders. This ETF is suitable for investors seeking simplified access to the top U.S. companies within a single share, with an expense ratio of 0.20% and a diversified sector exposure.
This ETF launched in October 2024 with a strong emphasis on high liquidity and low bid-ask spreads, typically at around 0.04%
(4) VanEck Fabless Semiconductor ETF
The VanEck Fabless Semiconductor ETF (SMHX) is a new offering focusing exclusively on fabless semiconductor companies. These firms design, develop, and market chips while outsourcing manufacturing to third-party foundries like Taiwan Semiconductor.
This business model, which emerged in the 1980s, allows companies to concentrate on innovation and design without the massive capital expenditure required for manufacturing facilities. SMHX tracks the MarketVector US Listed Fabless Semiconductor Index, offering a more targeted approach than its broader counterpart, SMH.
To be included, companies must generate at least 50% of their revenue from fabless semiconductor operations. The ETF employs a modified market-cap-weighted methodology and rebalances quarterly. Key features of SMHX include:
Concentrated portfolio: Top 10 holdings represent 73.92% of total assets.
Top holdings: Nvidia (21.87%), Broadcom (14.78%), and Astera Labs (6.67%).
Expense ratio: 0.35%, matching SMH.
Current AUM: $9.43 million.
Average daily trading volume: Around 27,000.
There are no dividend distributions at present.
SMHX has shown promising momentum, up close to 10% since early October 2024. While it shares some holdings with SMH, SMHX's portfolio includes pure-play design companies that are absent from its broader counterpart.
The ETF's launch and early success reflect growing investor recognition of the fabless model's advantages. However, investors should note that both SMHX and SMH have a significant Nvidia-heavy skew. Those looking to mitigate single-stock risk in the semiconductor space might consider an equal-weighted fund as an alternative.
The ETF maintains a concentrated portfolio structure, similar to its older sibling, with its top 10 holdings representing 73.92% of total assets. While both funds feature Nvidia as their top holding, SMHX has a 21.87% allocation.
The remaining holdings reflect SMHX's fabless focus, with Broadcom (AVGO) at 14.78% and Astera Labs (ALAB) at 6.67%. Other vital positions entail Advanced Micro Devices (AMD) (4.66%), Synopsys (SNPS) (4.68%), Qualcomm (QCOM) (4.59%), Marvell Technology (MRVL) (4.49%), Arm Holdings (ARM) (4.12%), Monolithic Power Systems (MPWR) (4.10%), and Cadence Design Systems (CDNS) (3.90%).
SMHX's portfolio includes pure-play design companies absent from its broader counterpart.
(5) iShares A.I. Innovation and Tech Active ETF
The iShares A.I. Innovation and Tech Active ETF (NYSE: BAI) is an actively managed ETF launched by BlackRock, designed to capture growth opportunities within the artificial intelligence (AI) and broader technology sectors.
This fund targets a concentrated portfolio of 20 to 40 global companies across various market capitalizations, investing in firms that develop or utilize AI technologies. These companies span multiple layers of the AI ecosystem, including infrastructure (e.g., AI processing and cloud), intelligence (AI models and data), and application services (software and AI-driven solutions).
Managed by BlackRock's experienced technology team, led by Tony Kim and Reid Menge, BAI seeks to leverage a research-driven approach to identify promising, high-growth companies that could drive innovation within AI and related fields.
This active approach aims to maximize total returns by focusing on firms where AI constitutes a significant revenue source, allowing flexibility and responsiveness to emerging tech trends.
The iShares A.I. Innovation and Tech Active ETF (NYSE: BAI) has an expense ratio of 0.55%, which includes a management fee of 0.68% with a 0.13% waiver applied, reducing costs for investors. The ten largest holdings are:
NVDA NVIDIA CORP Information Technology
MSFT MICROSOFT CORP Information Technology
META META PLATFORMS INC CLASS A Communication
AVGO BROADCOM INC Information Technology
TSM TAIWAN SEMICONDUCTOR MANUFACTURING Info Tech
AMZN AMAZON COM INC Consumer Discretionary
ORCL ORACLE CORP Information Technology
ALAB ASTERA LABS INC Information Technology
NOW SERVICENOW INC Information Technology
CDNS CADENCE DESIGN SYSTEMS INC Information Technology
Complete product information can be found at: https://www.ishares.com/us/products/339081/ishares-a-i-innovation-and-tech-active-etf
(6) iShares Technology Opportunities Active ETF
The iShares Technology Opportunities Active ETF (TEK) is an actively managed technology-focused fund that exposes investors to various U.S. and international technology companies selected for their growth potential.
It has an expense ratio of 0.75%, reflecting the management costs associated with active stock selection. The bid-ask spread typically sits around 0.12%, balancing liquidity with moderate trading costs due to its holdings' specialized, high-growth nature.
As of recent data, TEK includes 57 holdings across various tech subsectors, with a portfolio managed by Tony Kim and Reid Menge.
This fund was launched on October 21, 2024, and tracks an internal benchmark inspired by the MSCI ACWI Information Technology 10/40 Index, which guides its selection of innovative tech companies.
Complete product information at:
https://www.ishares.com/us/products/339083/ishares-technology-opportunities-active-etf
Investors can use TEK as a core or satellite position in a tech-heavy portfolio, as it dynamically adjusts to market trends within the sector.
