Another week, another addition to my SIPP — the adventurous corner of my pension portfolio. This week I bought the VanEck Semiconductor UCITS ETF, accumulation share class, ticker SMH. This is a pure-play semiconductor ETF listed on the London Stock Exchange, and it's been on my radar for a while. I finally pulled the trigger.
A quick reminder on how I approach my SIPP. The vast majority of the money sits in broad ETFs — S&P 500, global all-cap, a bit of FTSE 100. That's the engine. The individual and thematic picks are the satellites — small, high-conviction bets on themes I believe have genuine structural tailwinds. Collectively, these satellite positions make up less than 10% of the SIPP. I'm not gambling the pension on any single idea. Each position is kept deliberately small.
So what is SMH and why did I buy it? The VanEck Semiconductor UCITS ETF tracks the MVIS US Listed Semiconductor 10% Capped Index — essentially, the 25 largest semiconductor companies listed in the US. It's a concentrated, high-conviction bet on the global chip industry. The top holdings read like a who's-who of semiconductor giants: Nvidia at around 18%, TSMC at 12%, Broadcom at 8%, ASML around 5%, AMD, Qualcomm, Applied Materials, Texas Instruments, Micron, Lam Research. These are the companies that design, manufacture, and supply the chips that power everything from smartphones and data centres to cars and military systems.
Why semiconductors? Because chips are the picks and shovels of the modern economy. Every AI model needs GPUs to train. Every data centre needs networking chips and memory. Every electric vehicle is packed with power semiconductors. Every smartphone, every cloud server, every smart device — they all need chips, and the complexity and value of those chips keeps increasing. Semiconductors are a cyclical industry, no question about it. Booms and busts are part of the terrain. But the secular trend — more chips, more advanced chips, in more things — is one of the most durable investment themes I can think of.
The concentration of this ETF is both its strength and its risk. Nvidia alone is nearly a fifth of the fund. If Nvidia has a bad quarter, SMH feels it. TSMC — the Taiwanese semiconductor manufacturing giant — is another huge position, and geopolitical risk around Taiwan is real and serious. ASML, the Dutch company that makes the machines that make the chips, is effectively a monopoly but trades at a premium valuation that leaves little room for disappointment. This is not a diversified, sleep-well-at-night holding. It's a concentrated thematic bet, which is exactly why the position is small and in my SIPP where it has decades to compound.
The fund itself is UCITS-compliant, listed in London, and trades in GBP — no currency conversion headaches for UK investors like me. The ongoing charge is 0.35%, which isn't the cheapest ETF I own but is reasonable for a thematic fund with this level of concentration. It's an accumulation share class, so dividends from the underlying companies get reinvested automatically. That suits me — I'm not looking for income from this holding, I'm looking for capital growth over a very long time horizon.
What are the risks? Plenty. Semiconductors are notoriously cyclical — the industry goes through periods of oversupply and undersupply, and earnings can swing dramatically. Geopolitical risk is concentrated in Taiwan, where TSMC manufactures a huge portion of the world's most advanced chips. Valuation risk is real — semiconductor stocks have had an extraordinary run, and while earnings have grown to match, there's always the possibility of a multiple compression if growth expectations moderate. Trade restrictions, export controls, and technology sanctions are a persistent risk for an industry at the heart of US-China tensions.
That's precisely why the position is small. I'm not making a large bet on semiconductors. I'm making a small bet that the long-term demand for ever-more-advanced chips will continue to grow — driven by AI, by cloud computing, by electrification, by automation — and that the companies in SMH are the best-positioned to benefit. If I'm right, the small position grows into something more significant over the years. If I'm wrong, I lose a tiny amount of capital and move on.
This ETF joins my growing collection of AI-adjacent SIPP holdings. Constellation Energy provides the nuclear power for AI data centres. Nebius Group provides AI cloud infrastructure. Cipher Digital is turning from Bitcoin mining into AI data centre real estate. CoreWeave is pure GPU cloud for AI workloads. And now SMH — owning the actual chip companies that make the GPUs, the fabrication equipment, and the memory that all of the above depend on. They're all connected by the same theme: the massive infrastructure build-out that AI requires, from the power plant to the data centre to the silicon itself.
Is this sensible for a 66-year-old? By conventional standards, probably not — a concentrated thematic ETF in a cyclical industry inside a pension. But the position is small, the time horizon is long (I won't access this SIPP for years), and the underlying trend is genuinely structural. I'm not recommending anyone follow me. The majority of my money remains in broad ETFs because that's what I have the most conviction in. These satellites are interesting, exciting, and kept firmly in their place.
As always: this is what I did with my own money. It's not a recommendation. Do your own research. All investing carries risk — you can lose money, and past performance doesn't predict future returns. Thematic ETFs like SMH are concentrated, can be more volatile than broad market indices, and may not be suitable for most investors. I'm comfortable with the risk because the position is tiny relative to my overall portfolio and sits inside a pension I won't access for years. Your circumstances, goals, and risk tolerance are different from mine.