Investing in semiconductors with VanEck's SMH ETF: US or UCITS?

The AI race comes with an enormous bill, and big tech companies are committing billions of dollars to pay it. Every new data center needs processors, memory, and equipment capable of handling heavier workloads. For semiconductor companies, that investment creates opportunities across much of the supply chain.

SMH SMH VanEck's Semiconductor ETF, brings that opportunity to investors: the ETF holds leading semiconductor and semiconductor-equipment companies, offering exposure to different links in an industry that is difficult to build stock by stock.

The first step before investing is understanding what is driving semiconductor demand. Only then comes the question of how to add that exposure to your portfolio: SMH US SMHor SMH UCITS SMH.L. This is where dividends, taxes, and what each ETF actually holds come into play.

Semiconductors make it possible to produce the chips that process and store the data behind artificial intelligence. Producing them takes a connected network of companies: designers develop the processor architecture and outsource manufacturing to specialised firms, which in turn rely on precision machinery supplied by equipment makers. The chips are then packaged, tested, and integrated with memory and other components into servers and devices.

The expansion of AI is increasing demand across that chain. Models need to be trained, and sufficient capacity must then be available to handle users' queries and tasks. To that end, the big technology companies have moved from plans to concrete AI infrastructure projects in recent months. In April 2026, Google broke ground on its AI hub in Visakhapatnam, India, part of a US$15 billion commitment for 2026-2030 covering data centers, energy, and connectivity.

Amazon has already brought Project Rainier online, with roughly 500,000 Trainium2 chips, used by Anthropic to develop and deploy Claude. Meta, for its part, announced an agreement with AMD to deploy up to 6 GW of infrastructure based on AMD's Instinct GPUs for its AI models. These examples show how the expansion of artificial intelligence is driving demand for specialized processors and computing capacity.

VanEck notes that this investment reaches manufacturers as well as suppliers of equipment, memory, and interconnection. That is the link to SMH: a single trend can generate activity across several companies in its investment universe. How this plays out will depend on the pace of construction, the adoption of AI, and companies' ability to turn that demand into revenue.

SMH's SMH appeal lies in providing exposure to different parts of the semiconductor industry through a single investment. The ETF provides access to companies dedicated to semiconductors and semiconductor equipment, with exposure focused on the sector.

This matters because technological leadership shifts. A new processor can benefit its designer, generate orders for the firm that manufactures it, and require new machines to produce it. Investing through a basket spreads the investment across companies that play different roles. SMH makes that diversification within semiconductors straightforward.

With the investment case clear, the next question is which structure to choose. VanEck offers two SMH ETFs: the VanEck Semiconductor ETF (US) SMH, listed in the United States, and the VanEck Semiconductor UCITS ETF SMH.L, domiciled in Ireland. UCITS is a European Union framework established by Directive 2009/65/EC. In Ireland, the Central Bank authorises and supervises UCITS domiciled there. The difference becomes more interesting once we look at how each ETF behaves in a portfolio.

Access also depends on your broker of choice. To invest in SMH UCITS SMH.L, you will typically need an intermediary that offers this ETF on one of the European exchanges where it trades. For SMH US SMH, you will need a broker that provides access to Nasdaq or, where available, to the ETF through your local market. It is worth confirming that your broker offers the specific ETF: access to an exchange does not guarantee access to every ETF listed on it.

The first difference appears when the companies in the portfolio pay dividends. In SMH UCITS, that money stays inside the ETF and is reinvested. In SMH US, it is distributed to the investor in cash.

For those looking to hold their exposure for years, accumulation has a practical advantage: reinvestment happens inside the ETF itself. Those who prefer to decide what to do with that cash may value the SMH US distribution, whether to reinvest it, allocate it to another position, or use it.

These are simply two ways of handling the income generated by the investment. Receiving a dividend does not by itself add return compared with accumulating it; it changes where that money is held and who decides what to do with it next. Future payments are not guaranteed either.

One shortcut worth avoiding here: UCITS does not necessarily mean accumulation. That is the policy of SMH UCITS; other ETFs under the same framework distribute dividends. And keeping dividends reinvested does not make tax obligations disappear.

The ETF's domicile influences how much money remains available to reinvest or distribute. An eligible Irish ETF generally bears a 15% withholding on dividends from US stocks. In SMH US, ordinary distributions to a non-resident individual are typically subject to 30%, unless a treaty allows a lower rate. These taxes are applied at different levels: one inside the ETF and the other at the investor level.

For residents of Peru, Colombia, and Argentina, among other countries that do not have an income tax treaty with the United States, SMH UCITS could offer an advantage in the withholding applied to US dividends. This is one reason to consider the Irish structure, especially if automatic reinvestment is also a goal. The overall tax advantage will depend on local taxes and on the credits that can be used.

The picture is different in Mexico and Chile. An eligible individual can generally access a withholding rate of 10% and 15%, respectively, on SMH US ordinary distributions. In Mexico, the treaty with the United States may make SMH US more favorable in this respect, although it will depend on each investor's situation; in Chile, the reference rates match. That is why the UCITS withholding advantage is less significant in these two cases.

What matters is the after-tax outcome: withholding tax paid inside the ETF cannot necessarily be credited on your personal return, and accumulation does not eliminate local obligations. These considerations refer to individuals who are not US taxpayers and hold portfolio investments.

Seeing the SMH name on both alternatives, it is reasonable to assume it is the same ETF available in two jurisdictions. They are two different ETFs tracking two different indices. SMH US SMH tracks the MVIS US Listed Semiconductor 25 Index; SMH UCITS SMH.L tracks the MarketVector US Listed Semiconductor 10% Capped Screened Index. That difference affects both which companies are selected and how much weight each one receives.

The UCITS index caps each company at 10% at its rebalancings, although weights can drift with the market afterwards. That cap is part of its methodology: UCITS rules include an index-replication regime allowing up to 20% per issuer under certain conditions, as set out in the prospectus. The 10% should therefore not be presented as a universal limit for all UCITS ETFs.

SMH UCITS also applies ESG exclusions and is classified under Article 8 of SFDR. Its screens cover very severe violations of international standards, controversial weapons, and certain activities, such as tobacco and fossil fuels, subject to specific criteria and thresholds. These rules determine which companies can enter the index.

The official fact sheets as of September 14, 2026 show how those differences translate into the portfolio:

The contrast is revealing: the UCITS had less exposure to NVIDIA but more concentration in its ten largest holdings, with six companies between 9.99% and 11.31%. Reducing dependence on a single company does not necessarily mean reducing the concentration of the leading group. Portfolio composition can be just as important to performance as dividends, taxes, or costs.

Both ETFs publish annual expenses of 0.35%. The choice therefore comes down to the portfolio, the treatment of dividends, and the investor's tax situation.

For investors in Peru, Colombia, or Argentina among other countries that do not have an income tax treaty with the United States, SMH UCITS SMH.Lcombines two attributes that deserve attention: automatic reinvestment and a possible withholding advantage on US dividends. In Mexico, the treaty with the United States may make SMH more favorable on that component, although it will depend on each investor's situation; in Chile, the comparison has more reason to focus on accumulation, portfolio composition, and local taxation.

The decision also reflects the type of exposure you want to hold: how much weight you want to give the sector's leaders, and whether you prefer ESG exclusion criteria. SMH offers a way to invest in the semiconductor industry; choosing between the US and UCITS versions allows you to tailor that exposure to your portfolio and the country in which you invest.