Artificial intelligence (AI) is currently the biggest indicator in the technology sector. NVIDIA, Microsoft, Amazonand many more S&P 500 and Nasdaq Composite Index At a record high.
Nvidia, whose stock price has risen nearly 180% so far in 2024, recently The world’s largest company by market capitalizationSome investors may think it’s too late to switch to Nvidia. Meanwhile, as the semiconductor giant’s stock continues to soar with each passing day, investors may be looking for alternatives in the AI chip space.
of VanEck Semiconductor ETF (Nasdaq: SMH) This may be exactly what you are looking for. Exchange-traded funds (ETF) looks like a great opportunity for long-term investors interested in the semiconductor business outside of Nvidia.
What do you get when you buy the VanEck Semiconductor ETF?
The VanEck Semiconductor ETF holds shares of 25 semiconductor companies. Nvidia is the fund’s largest position with a 25.7% weighting, but other major holdings include: Taiwan Semiconductor, Broadcom, ASML Holdings, Qualcomm, Inteland Advanced Micro Devices.
One of the reasons I like the VanEck Semiconductor ETF is that it offers investors exposure to different segments of the AI chip market: For example, Intel and AMD compete directly with Nvidia in the graphics processing units (GPUs) space, while positions in the likes of Qualcomm and Broadcom offer investors passive positions in markets related to chip applications in the Internet of Things (IoT), smart appliances, mobile devices, and network infrastructure.
Additionally, Qualcomm in particular is an interesting opportunity given the company’s ongoing turnaround efforts. With expectations fairly low, we believe Qualcomm could be a potentially profitable opportunity if the company continues with its growth initiatives.
Additionally, one of my favorite, most respected and smartest hedge fund managers, Brad Gerstner, just added Broadcom to his portfolio, a move I think will not only boost Broadcom’s credibility but also impact the company’s role in the AI revolution.
How is the fund performing?
This table breaks down the average annual total returns of the VanEck Semiconductor ETFs over various time periods.
|
1 year |
3 years |
5 years |
10 years |
|---|---|---|---|
|
67.7% |
25.4% |
38.6% |
27.8% |
Data source: VanEck Semiconductor ETF factsheet.
As a word of caution, I would advise against getting too carried away with the one-year returns, remembering that the S&P 500 and Nasdaq are each approaching all-time highs, with technology companies being a big factor in that, so Nvidia and many of its peers have enjoyed some major buying activity over the past year.
But the five-year and 10-year returns may both catch your eye: Not only are these returns impressive, but they are also far better than the long-term average return of the S&P 500, which is about 6.5% when accounting for inflation.
In some sense, this makes sense: the S&P 500 is made up of a much broader range of companies than the VanEck Semiconductor ETF, which is concentrated in only a relatively small group. Additionally, the S&P 500 has exposure to many more end markets compared to the VanEck Semiconductor ETF.
Should you buy the VanEck Semiconductor ETF now?
On the one hand, the VanEck Semiconductor ETF boasts market-beating returns over the long term and offers investors a high degree of diversification across the semiconductor business.
However, it’s important to remember that the semiconductor industry is highly cyclical, which means demand trends can fluctuate wildly, which will impact these companies and the sentiment around them.
That being said, the fund’s expense ratio is quite reasonable at 0.35%. Investors looking for broad exposure to the chip industry and AI in general should consider the VanEck Semiconductor ETF. It’s a good option for investors looking for opportunities outside of the most obvious investments, but at an affordable price.
Should you invest $1,000 in the VanEck ETF Trust – VanEck Semiconductor ETF right now?
Before buying shares of VanEck ETF Trust – VanEck Semiconductor ETF, consider the following:
of Motley Fool Stock Advisor The analyst team Top 10 Stocks Stocks investors should buy now… and VanEck ETF Trust – VanEck Semiconductor ETF was not among them. The 10 selected stocks have the potential to generate big gains over the next few years.
Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That comes to $775,568.!*
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Adam Spatacco The Motley Fool has positions in Amazon, Microsoft, and NVIDIA. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Amazon, Microsoft, NVIDIA, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: buy January 2025 $45 calls on Intel, buy January 2026 $395 calls on Microsoft, sell August 2024 $35 calls on Intel, and sell January 2026 $405 calls on Microsoft. The Motley Fool recommends: Disclosure Policy.
Missed out on Nvidia? Here’s one great ETF to buy instead Originally published on The Motley Fool
