The VanEck Semiconductor ETF (SMH US) is arguably one of the purest listed expressions of the AI trade, because it owns the companies supplying the chips and manufacturing equipment at the heart of the AI infrastructure build-out. Although its top heavy, Nvidia alone represented ~23% of the ETF, followed by TSMC (10%), Broadcom (6%), Micron (6%), AMD (5.3%) and ASML (5.0%), giving the ETF concentrated exposure across AI accelerators, memory, foundries and semiconductor equipment.
For us, SMH personifies the AI infrastructure trade, providing concentrated exposure to the semiconductor companies supplying the computing power behind the global AI build-out, capturing the “picks and shovels” of AI, rather than the broader AI ecosystem of hyperscalers, software and applications.
These companies are making huge profits, and the recent 25% pullback was more around reining in irrational exuberance as opposed to actual clouds forming in the space. For us, it’s affording excellent risk/reward to this burgeoning industry.
- We can see the SMH making new highs post recent consolidation, a bullish read through for the likes of NVIDIA, Micron, Broadcom and AMD.
