The Ultimate Tech ETF to Buy With $5,000 Right Now
Key PointsThe iShares Semiconductor ETF is heavily concentrated in artificial intelligence and memory chipmakers.
In recent years, tech ETFs have delivered impressive returns, with artificial intelligence (AI) being the most prominent opportunity in the stock market. For those with $5,000 to invest now, the iShares Semiconductor ETF (SOXX) could be a suitable choice. This ETF focuses on semiconductor companies that produce the chips and equipment required for AI technology.
The iShares Semiconductor ETF's largest position is Nvidia, the most valuable publicly traded company, which has recently reported an astounding 106% year-over-year revenue growth and a 62% net profit margin. This chipmaker's GPUs command high margins due to intense demand and supply shortages.
While Nvidia leads in terms of size, Micron Technology comes in as the ETF's second-largest position, delivering better growth rates than Nvidia. Other top holdings like Advanced Micro Devices, Broadcom, and Marvell Technology also benefit from the same tailwinds as Nvidia.
These semiconductor companies primarily serve "hyperscalers," companies heavily investing in data centers, such as Amazon, Microsoft, and Meta Platforms. These tech giants have committed to substantial capital expenditures due to rising AI costs, which seem to have little impact on their balance sheets.
The top five holdings of the iShares Semiconductor ETF account for nearly 40% of its portfolio, providing significant exposure to the current semiconductor opportunity. The remaining positions are mainly chipmakers and semiconductor equipment providers. With only 30 holdings and a 0.33% expense ratio, this ETF has a history of outperforming the broader market, boasting an annualized return of 27.6% over the past 15 years.
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