The AI Gold Rush: Do Semiconductor ETFs Hold the Key Opportunities?

The artificial intelligence (AI) boom is proving to be a powerful and enduring force, driving a massive rally in semiconductor stocks and subsequently the exchange-traded funds (ETFs) that track them. Despite concerns of a potential bubble burst, continued expansion in AI is keeping the prospects for semiconductor ETFs bright.

The Unstoppable AI Business Boom

The AI sector has been experiencing unprecedented growth lately, fueled by historic levels of investment. As per Gartner’s September 2025 report, global spending on AI is expected to reach nearly $1.5 trillion by the end of this year.

It is needless to mention that gigantic investments from major tech hyperscalers’ growing venture in data centers have been playing the role of a major growth catalyst for the AI business' boom. Evidently, Big Tech firms Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT) and Meta (META) reported in August 2025 that they were set to spend as much as a cumulative $364 billion in their respective 2025 fiscal years, driven by their investments in AI, up from their prior estimates of around $325 billion (as cited in a Yahoo Finance press release).

With AI being rapidly integrated across diverse industries, ranging from automation of manual tasks in banking to personalizing treatment in the healthcare service industry, its growth prospects remain robust. Gartner projects overall global AI spending to exceed $2 trillion by 2026-end.

Why Semiconductors Are Soaring

Semiconductor companies remain the fundamental building blocks of AI. Advanced chips are essential for processing the enormous, data-intensive workloads required for AI applications. This has led to enormous growth for the semiconductor industry.

Notably, the Morningstar Global Semiconductors Index surged 34% (from the start of the year till Sept. 29, 2025), registering more than double the return of the entire U.S. market.

Interestingly, the AI boom is benefiting not just chip designers like NVIDIA (NVDA) and Broadcom (AVGO) but also manufacturers like Taiwan Semiconductor (TSM) and equipment suppliers like ASML Holding (ASML), which are critical to producing advanced semiconductors.

Looking ahead, Morningstar analysts expect AI chip revenues to increase roughly fourfold over the next few years, growing at a compound annual rate of 40% through 2028. This indicates the solid growth potential for semiconductor stocks.

The Case for Semiconductor ETFs

While the AI boom is here to stay, it goes without saying that uncertainty continues to persist in multiple forms, like the U.S.-China trade tension or an unexpected geopolitical event, potentially impacting one or more of the semiconductor stocks mentioned above. So, ETFs tracking these stocks will offer a strategic way to capitalize on the AI growth trend while managing risk.

As most of the semiconductor ETFs provide concentrated exposure to the entire semiconductor ecosystem, from designers and manufacturers to equipment suppliers, investing in them will instantly diversify your portfolio, mitigating the risk of investing in individual stocks.

Semiconductor ETFs in Focus

To make the most of the current market situation, investors interested in semiconductor ETFs may keep these ETFs in their portfolios:

VanEck Semiconductor ETF (SMH)

This fund, with total net assets worth $33.81 billion, offers exposure to companies involved in semiconductor production and equipment. Its top three holdings are NVIDIA (18.03%), Taiwan Semiconductor (9.89%) and Broadcom (8.25%).

SMH has rallied 41.6% year to date. The fund charges 35 basis points (bps) as fees.

Strive U.S. Semiconductor ETF (SHOC)

This fund, with net assets worth $128 million as of Oct 17, 2025, offers exposure to the U.S.-listed semiconductor companies. Its top three holdings are NVIDIA (20.05%), Broadcom (18.85%) and Micron Technology (6.19%).

SHOC has soared 42.6% year to date. The fund charges 40 bps as fees.

iShares Semiconductor ETF (SOXX)

SOXX, with net assets of $15.26 billion, provides exposure to U.S. companies that design, manufacture, and distribute semiconductors. Its top three holdings are Advanced Micro Devices (AMD) (9.57%), Broadcom (7.84%) and NVIDIA (7.02%).

SOXX has soared 34.9% year to date. The fund charges 34 bps as fees.

Invesco PHLX Semiconductor ETF (SOXQ)

This fund, with a net asset value of $53.35, offers exposure to the 30 largest U.S.-listed securities of companies engaged in the semiconductor business. Its top three holdings are NVDA (10.46%), AVGO (9.73%) and AMD (9.50%).

SOXQ has soared 36.7% year to date. The fund charges 19 bps as fees.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research