black rock manages $10 trillion worth of assets on behalf of its clients, making it the largest company of its kind in the world. To help our clients achieve their financial goals, we invest in everything from residential and commercial real estate to America's largest technology companies.
BlackRock is also the parent company of iShares, which manages more than 1,400 exchange-traded funds (ETFs) designed to provide a variety of asset classes readily available to investors of all skill levels.
of iShares Semiconductor ETF (socks -4.05%) is an investor in most of the world's top chip companies at the forefront of the artificial intelligence (AI) revolution.
Image source: Getty Images.
iShares Semiconductor ETF just completed a stock split
The iShares Semiconductor ETF has delivered compound annual returns of 30% over the past five years and has soared to $680 per share, but it has become a little less accessible for small investors. As a result, iShares implemented a 3-for-1 stock split, which tripled the number of shares in circulation, while the stock price fell by two-thirds.
While the value of the ETF was not affected, investors could now purchase it for as little as $237 (as of this writing), making the ETF accessible to a wider audience.
Given the magnitude of the AI opportunity, the iShares Semiconductor ETF's momentum is likely to continue. Here's how a $200,000 investment can turn into more than $1 million over the next 10 years. But don't worry. If this scenario plays out, the investor can benefit from his 5x return, regardless of the starting capital.
The iShares Semiconductor ETF invests in the world's top chip stocks, including Nvidia.
AI would not exist without powerful data center chips designed to help developers build, train, and deploy models. Nvidia (NVDA -5.55%) is by far the leader in this segment, benefiting greatly from the success of its industry-leading H100 graphics processing unit (GPU).
Nvidia's market capitalization is $2.3 trillion as of this writing ( apple and microsoft ), with more than $1.5 trillion of that value added in the past 12 months alone. The iShares Semiconductor ETF's strong returns recently are not surprising given that Nvidia is its largest holding.
This ETF has holdings in 30 semiconductor stocks, but is focused on the top five stocks, which account for 41.2% of the total portfolio value.
|
stock |
ETF weighting |
|---|---|
|
1. Nvidia |
11.27% |
|
2. Advanced Micro Devices |
10.33% |
|
3. broadcom |
8.66% |
|
Four. Qualcomm |
6.21% |
|
Five. intel |
4.75% |
Data source: iShares. Portfolio weights are as of March 6, 2024 and are subject to change.
While Nvidia currently dominates the AI data center chip market, Advanced Micro Devices (AMD) also ships competing hardware. Additionally, AMD has an estimated 90% market share in AI chips designed for edge computing (computers and mobile devices), which could be the industry's next frontier.
Apart from the top five, iShares Semiconductor ETF also occupies the top five. taiwan semiconductorThe company makes more than half of the world's chips, including data center GPUs designed by Nvidia and AMD. I also own ETFs micron technologyis a leading manufacturer of memory (DRAM) and storage (NAND) chips, which are becoming increasingly important due to the rise of AI.
SOXX could turn $200,000 into $1 million within 10 years
The iShares Semiconductor ETF has returned 60% over the past year, more than double the benchmark's 28% return. S&P500 index. This is even better than his 48% increase in high-tech industries. Nasdaq-100 index.
This performance is not unusual, as the iShares Semiconductor ETF has delivered a compound annual return of 30% over the past five years and 25% over the past 10 years. The S&P 500 rose 14% and 13%, respectively, in these time frames.
If the iShares Semiconductor ETF could achieve a 25% annual return over the next 10 years, that $200,000 investment would turn into more than $1.8 million. Although this is a high bar, Wall Street estimates of the economic impact of AI are in the trillions of dollars. With Nvidia and AMD making up such a large portion of his ETF, we can't rule out continued outperformance in the coming years.
But even if the iShares Semiconductor ETF averaged a modest 15% annual return over the next 10 years, it would still provide an impressive financial return for investors. The table below shows how the difference in annual earnings affects his initial outlay of $200,000.
|
Initial investment |
annual compound interest profit |
Balance after 10 years |
|---|---|---|
|
$200,000 |
15% |
$809,111 |
|
$200,000 |
20% |
$1,238,347 |
|
$200,000 |
twenty five% |
$1,862,645 |
Calculations by the author.
The iShares Semiconductor ETF is a big bet on the future of AI, and its recent stock split gives investors of all experience levels the opportunity to buy.
Anthony Di Pigio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends his Broadcom and Intel and recommends the following options: A long January 2023 $57.50 call on Intel, a long January 2025 $45 call on Intel, a long January 2026 $395 call on Microsoft, a short January 2026 $405 call on Microsoft, and a long January 2026 $405 call on Microsoft. Call short call $47 Intel in May. The Motley Fool has a disclosure policy.
