Invesco Semiconductors ETF (PSI) seeks to track the Dynamic Semiconductor Intellidex Index, which measures the performance of U.S. companies primarily engaged in semiconductor design, manufacturing, and equipment production. This sector-focused equity ETF provides concentrated exposure to the chip industry that powers modern electronics and computing.
How It Works
PSI uses a passively managed, modified market-capitalization-weighted approach that follows its benchmark index. The fund holds approximately 30-40 semiconductor companies, with positions weighted based on market value but subject to concentration limits to prevent over-allocation to the largest chip makers. Rebalancing occurs quarterly to maintain index alignment and sector focus. Holdings include semiconductor designers like NVIDIA and AMD, manufacturers like Taiwan Semiconductor, and equipment makers like Applied Materials.
Key Features
- Pure-play semiconductor exposure with concentrated portfolio of 30-40 holdings focused exclusively on chip industry leaders
- Modified market-cap weighting prevents over-concentration in mega-cap stocks while maintaining growth company exposure
- Established track record since 2008 through multiple semiconductor cycles including AI boom and supply chain disruptions
Risks
- This ETF can lose value during semiconductor downturns, potentially declining 40-60% when chip demand weakens or supply chains face disruption
- High concentration risk with single sector exposure means company-specific issues or regulatory changes can significantly impact performance
- Cyclical industry volatility creates boom-bust patterns where valuations can swing dramatically based on technology adoption cycles
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for aggressive growth investors with 3+ year time horizons seeking concentrated semiconductor exposure. High risk tolerance required due to sector volatility and cyclical nature. Appropriate for investors bullish on AI, 5G, electric vehicles, and other chip-intensive technologies driving long-term demand.