Forget Nasdaq — Buy This Magnificent ETF Instead

The Nasdaq Composite Index it has a great long-term track record. Over the past decade, for example, the index has risen 566% in value. That return to surpassed on S&P 500401% growth over the same period.

The Nasdaq’s long-term performance seems incredible until you compare it to one of my favorite exchange-traded funds (ETFs). Over the past decade, this ETF has increased in value by nearly 1,700% — about three times the return of the Nasdaq.

The best news is that it’s not too late to jump in.

This is one of the best ETFs ever

Perhaps the best ETF of the last decade was VanEck Semiconductor ETF (SMH -0.17%). It’s not hard to see why. As the ETF name suggests, this investment vehicle is all-in on semiconductors. There aren’t many stocks that fall into this category, which means he has a focused portfolio. More than 70% of the ETF’s portfolio, for example, is invested in just 10 companies.

The ETF’s largest holding — Nvidia — dominates the portfolio with a weight of almost 20%. This was a smart decision, given that Nvidia’s value has skyrocketed in recent years. The growth of AI has a lot to do with the company’s success, as demand for semiconductors and other critical AI components continues to grow.

The rest of the portfolio can hardly be considered behind, even if it doesn’t match Nvidia’s performance. Taiwan Semiconductorfor example, it is the holding no. 2, comprising 13% of the portfolio. Its stock is up more than 80% in the past 12 months. Broadcomthe third-largest holding, with about 8% of the portfolio, has seen its shares rise 87% over the same period.

All of this means that the VanEck Semiconductor ETF was in the right place at the right time. Its portfolio is mandated to invest in semiconductor stocks. And those stocks have proven to be some of the best investments in recent memory.

But don’t think the run is over. There are two reasons why new investors should still consider this high-performing ETF.

^ SPXTR data by YCharts.

There could be more to go

The many reasons why semiconductor stocks have performed so well in recent years won’t be diminishing anytime soon.

Global demand for semiconductors is growing by more than 15% annually. Many industry forecasts predict that this rapid growth rate will continue. Fortune Business Insights, for example, predicts semiconductor demand to grow 14.9% per year through 2032. Its research highlights three main areas of growth: artificial intelligence, machine learning, and the Internet of Things.

“These technologies help and improve the processing time of the memory chip to process large amounts of data in the shortest amount of time,” Fortune points out. “Furthermore, the growing potential demand for faster and more advanced memory chips in data center applications is expected to drive market growth over the forecast timeframe.”

The great thing about this ETF is that if you invest in a multi-stock fund, you don’t have to try to predict a single winner. Historically, chip wars have spawned many cycles of winners and losers. Nvidia leads the pack today, but what will happen in the future is anyone’s guess.

With the VanEck Semiconductor ETF, there’s no guesswork required. Its portfolio weighs certain semiconductor stocks more heavily than others, but generally its holdings are diversified across each major competitor, end-user type and geography.

Do you believe in the rise of AI? These are the stocks you want to bet on, and the VanEck Semiconductor ETF has proven its ability to allocate capital wisely within the sector.