Billions Just Hit The Biggest Semiconductor ETF: Are Investors Going All In On AI Chip Boom?

Zinger Key Points
  • New data shows that $1.6 billion flowed into the VanEck Semiconductor ETF this week, doubling record inflows.
  • The move can be read as further proof of sustained confidence in the sector amongst investors.

The semiconductor industry is reaching unprecedented levels of popularity among investors as it becomes clear that chips have become some of the most important commodities of present times.

On Thursday, major cash inflows to the world's largest semiconductor ETF shows substantial disbelief in the idea that a tech bubble might burst any time soon.

Semiconductors are not only consequential within the supply chain for consumer electronics: they serve as the engine behind industrial growth, military supremacy and might ultimately become the backbone of the geopolitical success for nations like China and the U.S.

According to data shared by Eric Balchunas, senior ETF analyst for Bloomberg, the VanEck Semiconductor ETF SMH had record cash inflows on Thursday, possibly triggered by automated buying signals.

The ETF, which is pegged to the MVIS US Listed Semiconductor 25 Index and follows the performance of the 25 largest and most liquid U.S.-listed companies in the industry, received an injection of $1.6 billion, doubling its previous all-time high for weekly fund flows.

The event can be read as another vote of trust towards the up-and-coming industry. Shares of the VanEck Semiconductor ETF peaked last week. The fund added almost 80% in gains in the last year and 30% in 2024 alone.

Also read: Citadel CEO Ken Griffin Unsure Of AI Market Bubble But Says Nvidia ‘Sits In A Pretty Good Position’ Now: ‘Really On Top Of Their Game’

Other ETFs following the industry show a similar trajectory. iShares Semiconductor ETF SOXX, the second-largest semiconductor ETF after VanEck by total assets, grew 58% in the past year and 19% since January.

Direxion Daily Semiconductor Bull 3X Shares SOXL, ranking third in total assets among its peers, stands out as the top performer. As a leveraged ETF aiming to amplify the industry’s growth threefold, the fund has surged by 183% over the past year, with a notable 53% increase since the beginning of January alone.

While the industry saw a slight downtick this week, ETFs following the sector have benefited significantly from the recent tech rally, which counted semiconductor stocks among some of its biggest winners.

NVIDIA Corp NVDA, which has been consistently referred to as the real winner of the AI race, has led the rally, accumulating more than 80% in growth since January. Nvidia's first mover advantage in developing high-end chips made to train artificial intelligence models has been welcomed by investors with open arms.

Competitor Advanced Micro Devices, Inc. AMD also showcases remarkable —yet more moderate— growth, having added 33% in gains since the start of the year.

Top chip manufacturer Taiwan Semiconductor Mfg. Co. Ltd. TSM follow's AMD's trajectory closely, adding 37% since January. The company, which is a supplier for Nvidia, AMD and other "fabless" chip companies, is overcoming a slump in its own country’s tech sector with the boost received from increasing demand in AI infrastructure.

Now read: Nvidia CEO Jensen Huang Thinks Even Free AI Chips From Rivals Are ‘Not Cheap Enough’ Compared To Its GPUs

Image created using artificial intelligence with Midjourney.

Market News and Data brought to you by Benzinga APIs
Posted In: NewsSector ETFsMarketsTechETFsGeneralsemiconductors
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!