Riding the Wave: Semiconductor ETFs in High Gear

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From: The ETF Shelf

Semiconductors ETFs...Full Throttle

Semiconductor ETFs are on a tear, racking up eight straight months of net inflows totaling a staggering $7.3 billion. This surge has pushed their combined assets under management to a hefty $43 billion.

The driving force behind this surge? The booming field of Artificial Intelligence (AI). Since the launch of ChatGPT in late 2022, AI has become a top priority for corporations and SMEs alike. Companies are racing to develop Large Language Models (LLMs) and other AI-powered tools and services to gain a competitive edge. This, in turn, is fueling a surge in demand for semiconductors, the essential building blocks of AI.

AI relies on semiconductors for the necessary processing power, data storage, and efficient data transfer to handle complex computations and vast amounts of data efficiently. Specialized chips like GPUs and TPUs are particularly crucial for AI performance.

NVIDIA, the undisputed leader in the AI hardware race, has skyrocketed over 530% since the launch of ChatGPT. Their high-performance chips are perfectly positioned to meet the ever-growing demand for AI processing power. The company, now the third largest by market cap at $2.86 trillion, is a top holding in many semiconductor ETFs. For example, SMH, the largest semiconductor ETF with $21 billion in AUM, allocates 22% to the company.

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