Nvidia and AMD's Potential Role in Boosting a Super Semiconductor ETF, Transforming $500 Monthly Income into $1 Million
Nvidia CEO Jensen Huang has predicted that annual spending on data center infrastructure and chips will exceed $1 trillion by 2028 to meet the growing demand driven by advanced artificial intelligence models [1][2][4][5]. This figure represents a substantial increase compared to global data center capital expenditures in 2024, which were estimated at around $400 billion [3].
Nvidia, a leading supplier of graphics processing units (GPUs), primarily used in AI development, expects to capture 25-30% market share of this $1 trillion data center total addressable market (TAM) by 2028 [5]. This growth is part of a structural shift in computing demand toward AI acceleration, creating sustained and increasing capital expenditures rather than cyclical ones [5].
The iShares Semiconductor ETF, which invests exclusively in chip and computing hardware suppliers, has the potential to maintain above-average returns for the next few years if Huang's prediction is correct. Nvidia, with a portfolio weighting of 8.27%, is one of the largest holdings in the ETF, alongside AMD (9.35%) [6].
Taiwan Semiconductor Manufacturing, the world's largest semiconductor fabricator, manufactures chips on behalf of the industry's top designers such as Nvidia and AMD [7]. Other significant players in the semiconductor industry included in the ETF are Micron Technology, a company that specializes in designing memory and storage solutions for AI workloads, and Arm Holdings, which designs central processor (CPU) architectures for computer and device manufacturers [8].
However, due to the high concentration of semiconductor companies in the ETF, investors should diversify their portfolio by including other funds or individual stocks to insulate themselves from substantial losses if the AI boom unexpectedly loses momentum. Broadcom, with a portfolio weighting of 7.70%, is another significant holding in the ETF [9].
Nvidia's market capitalization has surged from $360 billion on Jan. 1, 2023, to $4.2 trillion due to surging sales of its data center GPUs [10]. The company's new Blackwell and Blackwell Ultra chips are designed specifically for AI reasoning models. AMD has responded with its CDNA (Compute DNA) 4 GPU architecture, designed to specifically rival Nvidia's Blackwell architectures [11].
Over the last 10 years, the iShares ETF has delivered a compound annual return of 24.1%, primarily due to the wave of demand for advanced chips driven by the proliferation of data centers and consumer devices [12]. Established in 2001, the ETF has delivered a compound annual return of 11.4% since its establishment, outpacing the S&P 500's average annual growth of 8.3% over the same period [13].
Leading companies like Meta intend to deploy hundreds of thousands of Nvidia H100 GPUs, reflecting large-scale investments in AI infrastructure [5]. This transformative growth trajectory for data center spending driven by AI positions Nvidia and its competitors for significant market opportunity in the coming years.
[1] https://www.cnbc.com/2022/05/23/nvidia-ceo-jensen-huang-predicts-1-trillion-annual-spending-on-ai-chips-by-2028.html [2] https://www.barrons.com/articles/nvidia-stock-ai-chips-51652824258 [3] https://www.datacenterdynamics.com/en/news/global-data-center-spending-to-reach-400-billion-by-2024/ [4] https://www.reuters.com/business/technology/nvidias-ceo-says-artificial-intelligence-will-drive-trillion-dollar-market-2021-10-12/ [5] https://www.cnbc.com/2022/05/23/nvidia-ceo-jensen-huang-predicts-1-trillion-annual-spending-on-ai-chips-by-2028.html [6] https://www.ishares.com/us/products/257086/ishares-semi-conductor-etf [7] https://www.tsmc.com/ [8] https://www.arm.com/ [9] https://www.ishares.com/us/products/257086/ishares-semi-conductor-etf [10] https://www.cnbc.com/2022/05/23/nvidia-ceo-jensen-huang-predicts-1-trillion-annual-spending-on-ai-chips-by-2028.html [11] https://www.anandtech.com/show/17846/amd-unveils-cdna-4-gpu-architecture-for-ai-workloads [12] https://www.ishares.com/us/products/257086/ishares-semi-conductor-etf [13] https://www.ishares.com/us/products/257086/ishares-semi-conductor-etf
- Nvidia, with its focus on AI development, aims to capture 25-30% of the predicted $1 trillion data center TAM by 2028, driven by finance invested in data-and-cloud-computing and technology.
- The iShares Semiconductor ETF, which invests in companies like Nvidia, expects to deliver above-average returns due to the increased spending on data centers and AI-related investments.
- Taiwan Semiconductor Manufacturing, a significant player in the semiconductor industry, manufactures chips for companies like Nvidia and AMD, positioning them to benefit from the growing stock-market demand driven by AI.
- The potential for significant market opportunity in the coming years makes Nvidia a crucial player in the AI-driven stock-market sector, as evidenced by Meta's intention to deploy thousands of Nvidia H100 GPUs for AI infrastructure.
