Riding the AI Wave with the Semiconductor ETF SOXQ

Published by MEXEM Technical Analysis

June 13, 2023 5:37 PM

Published - June 8th, 2023 @11:58 AM (CET)

Resurgence in the Semiconductor Industry

The semiconductor industry is witnessing a remarkable resurgence, largely propelled by significant advances in artificial intelligence (AI) and its vast opportunities. Now more than ever, investors are recognizing the importance of semiconductors as the key drivers behind the AI revolution.

SOXQ: An Investment in Semiconductors

Against the backdrop of Nvidia's striking first-quarter earnings, analysts from Susquehanna have tagged AI as the "new gold rush" and have hailed Nvidia as the provider of the essential tools for the AI industry. However, it's essential to remember that there are other chipmakers like Marvell and Advanced Micro Devices that also supply these vital AI tools.

SOXQ's Performance and Structure

SOXQ (NASDAQ:SOXQ)  is a compact $128 million ETF by Invesco that's focused on the PHLX Semiconductor Sector Index. This Index tracks the performance of the top 30 US-listed semiconductor stocks, covering all aspects of the semiconductor supply chain, right from design to distribution and sales.

SOXQ's Expense Ratio and Growth

Given the escalating investor interest in AI and semiconductors, it's no surprise that SOXQ has witnessed a 38% growth year-to-date. Launched only in 2021, SOXQ doesn't have an extensive track record but has demonstrated promising potential. One of its attractive features is a modest expense ratio of 0.19%, which is considerably lower than many popular semiconductor and AI-focused ETFs in the market.

SOXQ's Holdings and Exposure

In terms of holdings, SOXQ is not extensively diversified, with a total of 31 holdings. Its top 10 holdings comprise 64.5% of the fund. Nevertheless, for investors seeking high exposure to semiconductor stocks like Nvidia (NASDAQ:NVDA)

, AMD (NASDAQ:AMD) , and Marvell (NASDAQ:MRVL), this isn't an issue.

Prominent Companies in SOXQ

Nvidia, SOXQ's top holding with an 11.2% weighting, has made headlines recently with its unprecedented earnings report. The company's projected sales for the current quarter are around $11 billion, marking a 64% increase year over year, and far exceeding analyst estimates.

Further Insights into SOXQ's Portfolio

Other notable SOXQ holdings include AMD, with a 10.8% weighting, and Broadcom, holding the third-largest position with a 9.1% weighting. The fund also includes companies like Taiwan Semiconductor and ASML Holding, integral to the semiconductor supply chain.

Future Expectations from SOXQ's Holdings

Finally, Marvell, constituting 4% of the fund, has reported impressive earnings, with its shares surging almost 30% in a single day. The company expects its AI revenue to double over the next two fiscal years.

Analysts' View on SOXQ

Analysts generally view SOXQ as a Moderate Buy, with an average price target of $29.70, implying an upside potential of approximately 8% from current prices. SOXQ also boasts a robust ETF Smart Score of 8, indicative of an Outperform rating.

SOXQ: A Strong Bet on AI's Future. In conclusion, SOXQ presents a cost-effective method of gaining exposure to the influential players in the AI industry. As AI continues to disrupt various sectors, companies like Nvidia, AMD, and Marvell are poised to spearhead this technological advancement.

The information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions. 


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