Wall Street bets on AI chip boom keep getting more concentrated
The semiconductor sector has been a hot topic in the market, thanks to the AI boom and the success of Nvidia. With Nvidia becoming the largest stock in the U.S. market, investors are closely watching the performance of chip stocks. While there are concerns about the concentration of tech stocks in the S&P 500, focusing on chip stocks as an investment theme can be promising for investors with a risk appetite.
One of the most popular ways for investors to gain exposure to the semiconductor sector is through the VanEck Semiconductor ETF (SMH). This ETF includes companies across the global supply chain, such as Nvidia for GPU design, TSMC for manufacturing, and ASML for equipment supply. The SMH has seen significant growth, with a portfolio size of nearly $30 billion and a 30% increase since the beginning of the year.
Other ETFs like the iShares Semiconductor ETF (SOXX) and the Invesco PHLX Semiconductor ETF (SOXQ) offer slightly different chip exposures and have attracted investors looking for concentrated exposure to the chip industry. Additionally, the SPDR S&P Semiconductor ETF (XSD) takes a unique approach by equal-weighting stocks in its underlying index, providing a more diversified bet across the sector.
The Invesco Semiconductors ETF (PSI) offers another way to play the semiconductor theme by using a custom index that selects companies based on price momentum, earnings momentum, and value. This ETF includes mid-cap chip designers and manufacturers that may not be included in larger ETFs, providing exposure beyond mega-cap companies.
For investors looking for focused exposure on fabless semiconductor companies, the VanEck Fabless Semiconductor ETF (SMHX) may be a good option. This ETF includes pure-play fabless companies like Cadence Design Systems and Monolithic Power, which focus on power efficiency in data centers.
Overall, the semiconductor sector is experiencing a super cycle, according to industry experts. With the rapid advancements in AI and chip technology, investing in semiconductor ETFs can be a lucrative opportunity for investors interested in the tech sector. Keep an eye on the trends and figures shaping the ETF market by signing up for our weekly newsletter.
