Last month, shares of the iShares Semiconductor ETF (NASDAQ:SOXX) continued their upward trend, which has been ongoing for quite some time. The semiconductor sector saw a boost in the middle of the month, largely due to positive feedback surrounding Meta Platforms’ new Muse AI personal assistant. This development suggests that we might be entering a new phase where personal AI agents become more common.
If Muse and other similar tools like Instinct are indeed the future of chatbots, there could be a surge in demand for semiconductors, including CPUs and memory. This news helped lift the ETF by 11%, as reported by S&P Global Market Intelligence.
As illustrated in accompanying data, most gains appeared in the middle of the month, driven by the excitement around Muse. Almost all the leading chip stocks fared well last month, riding the wave generated by Meta’s announcement.
Among SOXX’s top five holdings are Nvidia, Micron, AMD, Broadcom, and Intel. Notably, three of these companies enjoyed double-digit increases: Intel rose by 34%, AMD by 30%, and Micron by 11%. In contrast, Broadcom slipped by 5%, while Nvidia gained 3%. It seems logical that AMD and Intel, being CPU manufacturers, would be more directly affected by advancements in agentic AI, unlike Nvidia and Broadcom which have less exposure to such technologies.
Interestingly, even with the Federal Reserve raising interest rates by 25 basis points—which typically puts pressure on growth stocks like semiconductors—the sector continued its ascent. Concerns over AI safety expressed by Anthropic CEO Dario Amodei and other leaders didn’t seem to hinder the momentum either. Towards the end of the month, significant AI figures met at the White House with President Trump to address these safety concerns, although no substantial regulations emerged from that discussion.
Now, just a couple of days into October, SOXX has already risen by 3.6% this month, buoyed by a solid earnings report from Micron. They indicated that tight supply conditions in the memory sector would persist at least through 2028, suggesting the AI surge is here to stay. On Friday, stocks jumped following a surprisingly cool employment report, making a rate hike by the Fed seem less likely when they gather at the month’s end. Although it may seem backward for stocks to rally on weak job numbers, the focus for investors appears to be on interest rate implications, at least until a clear economic downturn becomes apparent.
The current price-to-earnings ratio for SOXX stands at 43, which might seem steep, but the rapid growth in the sector arguably justifies it. When considering investment in the iShares Semiconductor ETF, it’s essential to weigh this against other options in the market.
The Motley Fool’s analysis team recently pointed out stocks that they believe are better picks for long-term growth than the iShares Semiconductor ETF. For instance, past recommendations like Netflix and Nvidia have notably outperformed, leading to exceptionally high returns over time. That history suggests there’s value in carefully selecting stocks based on solid analytical backing.
In summary, the semiconductor sector is certainly on the rise, and while the iShares trust offers potential, there might be other alternatives that could be even more fruitful. It’s really worth considering the broader landscape before making a commitment.
