3 ETFs For Nvidia's Big Arm Holdings Acquisition

News broke Saturday that semiconductor giant Nvidia NVDA is in talks to acquire Arm Holdings, a UK-based chip designer, from Japan's SoftBank Group for $40 billion.

That would be a nice win for much-maligned SoftBank SFTBY, which acquired Arm for $32 billion in 2016. Should the deal materialize, it would be by far the largest in Nvidia history.

“Arm and Nvidia have been in exclusive talks for several weeks and a deal could be sealed early next week, the people said—assuming it isn’t derailed at the last minute,” reports The Wall Street Journal. “Arm designs microprocessors that power most of the world’s smartphones. By joining forces with Nvidia, the combined company would be a powerhouse in the chip industry.”

Nvidia shares more than doubled this year and with a market value of almost $304 billion, the company is the largest domestic semiconductor producer.

With that status, Nvidia is a marquee component in an array of exchange-traded funds. Here are a few to consider.

VanEckVectors Semiconductor ETF (SMH)

The VanEckVectors Semiconductor ETF SMH is a $2.5 billion fund and is one of the benchmark chip ETFs. It's also a fine proxy on Nvidia as the stock is SMH's second-largest holding at a weight of 10.39%.

When an ETF's second-largest component represents more than 10%, it means the fund is top-heavy and that's the case with SMH. Bottom line here: so goes Taiwan Semiconductor TSM and Nvidia, so goes SMH. That pair of stocks combine for a quarter of the fund's roster.

Global X Robotics & Artificial Intelligence ETF (BOTZ)

Given Nvidia's deep reach in the artificial intelligence space, the Global X Robotics & Artificial Intelligence ETF BOTZ makes for a sensible ETF with a large weight to the stock. Indeed, BOTZ allocates 9% of its weight to Nvidia and the chipmaker is the fund's top holding. Including the aforementioned SMH, just two ETFs have bigger Nvidia weights than BOTZ.

BOTZ holdings are companies “that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles,” according to Global X.

Pacer BioThreat Strategy ETF (VIRS)

A surprising inclusion on this list, the Pacer BioThreat Strategy ETF VIRS debuted in late June as one of first batch of “coronavirus ETFs.” Investors shouldn't be fooled by the name because VIRS isn't a dedicated healthcare ETF.

Rather, it focuses on multiple themes stemming from pandemics. As a result, Nvidia is the largest holding in VIRS at a weight of almost 8%. Just four other ETFs have bigger Nvidia allocations.