BlackRock manages $10 trillion worth of assets on behalf of its clients, making it the largest company of its kind in the world. It invests in everything from residential and commercial real estate to America's largest technology companies in order to help its clients meet their financial goals.
BlackRock is also the parent company of iShares, which manages more than 1,400 exchange-traded funds (ETFs) designed to place a variety of asset classes at the fingertips of investors of all skill levels.
The iShares Semiconductor ETF (SOXX -0.72%) invests in most of the world's top chip companies, which are at the forefront of the artificial intelligence (AI) revolution.
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The iShares Semiconductor ETF just completed a stock split
The iShares Semiconductor ETF delivered a compound annual return of 30% over the last five years, soaring to $680 per share, which made it somewhat inaccessible to smaller investors. As a result, iShares executed a 3-for-1 stock split, which increased the number of shares in circulation threefold, while reducing its stock price by two-thirds.
It had no impact on the value of the ETF, but investors can now buy in for as little as $237 (as of this writing), making it accessible to a wider audience.
The momentum in the iShares Semiconductor ETF will likely continue given the sheer size of the AI opportunity. Here's how it could turn a $200,000 investment into more than $1 million over the next 10 years -- but don't worry, investors with any amount of starting capital can benefit from a fivefold return if this scenario plays out.
The iShares Semiconductor ETF invests in the world's top chip stocks, including Nvidia
AI wouldn't exist without the powerful data center chips designed to help developers build, train, and deploy their models. Nvidia (NVDA -0.12%) is the leader in that segment by a mile, and it's reaping substantial results from the success of its industry-leading H100 graphics processing unit (GPU).
Nvidia has a market cap of $2.3 trillion as of this writing (only Apple and Microsoft are worth more) and over $1.5 trillion of that value was added in the last 12 months alone. The powerful returns in the iShares Semiconductor ETF lately are no surprise when you consider Nvidia is its largest holding.
The ETF holds a stake in 30 semiconductor stocks, but it's heavily weighted toward its top five positions, which account for 41.2% of the value of its entire portfolio:
Stock | ETF Weighting |
|---|---|
1. Nvidia | 11.27% |
2. Advanced Micro Devices | 10.33% |
3. Broadcom | 8.66% |
4. Qualcomm | 6.21% |
5. Intel | 4.75% |
Data source: iShares. Portfolio weightings are as of March 6, 2024, and are subject to change.
While Nvidia dominates the market for AI data center chips today, Advanced Micro Devices (AMD) is now shipping competing hardware. Plus, AMD has an estimated 90% market share in the AI chips designed for edge computing (computers and mobile devices), which could be the industry's next frontier.
Outside of its top five positions, the iShares Semiconductor ETF also holds Taiwan Semiconductor, which manufactures more than half of the world's chips -- including the data center GPUs designed by Nvidia and AMD. The ETF also holds Micron Technology, a leading producer of memory (DRAM) and storage (NAND) chips, which are increasingly important with 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 doubling the 28% return of the benchmark S&P 500 index. It's even better than the 48% gain in the tech-heavy Nasdaq-100 index.
That outperformance isn't an anomaly, because the iShares Semiconductor ETF delivered a compound annual return of 30% over the last five years, and 25% over the last 10 years. The S&P 500 rose 14% and 13% across those time frames, respectively.
If the iShares Semiconductor ETF were to deliver a 25% annual return over the next 10 years, it would turn an investment of $200,000 into more than $1.8 million. It's a high bar, but Wall Street's estimates for the financial impact of AI are measured in the trillions of dollars. With Nvidia and AMD representing such a large percentage of the ETF, continued outperformance in the coming years can't be ruled out.
But even if the iShares Semiconductor ETF returned a more modest 15% annually on average over the next decade, it would still deliver a spectacular financial gain for investors. The below table shows how a difference in annual return would affect an initial outlay of $200,000:
Initial Investment | Compound Annual Return | Balance After 10 Years |
|---|---|---|
$200,000 | 15% | $809,111 |
$200,000 | 20% | $1,238,347 |
$200,000 | 25% | $1,862,645 |
Calculations by author.
The iShares Semiconductor ETF is a great bet on the future of AI, and its recent stock split gives investors of all experience levels the opportunity to buy in.
Anthony Di Pizio has no position in any of the 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 Broadcom and Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
