Semiconductor equities and related ETFs notched impressive performances in the first half of the year. They were buoyed by ongoing enthusiasm for the AI trade and post-Liberation Day resurgence by the Magnificent Seven.
The sample size is small, but there’s evidence that’s carrying over to the second half. That’s highlighted by the Invesco PHLX Semiconductor ETF (SOXQ) gaining 1.93% last week. That boosted its year-to-date gain to 13.39%. SOXQ, which follows the widely observed PHLX SOX Semiconductor Sector Index, enters the second half on solid footing. And that’s because AI expenditures are expected to continue soaring.
Take the case of Nvidia (NVDA), the largest holding in SOXQ. In 2020, that chip giant notched $800 million in AI-related sales. That figure is expected to swell to $13.9 billion this year. Broadcom (AVGO), the second-largest component in SOXQ, is a dominant AI chip name in its own right.
“Unlike Nvidia, Broadcom deals in merchant silicon. It’ll sell its chips and intellectual property to anyone, and in many cases, you may never know that Broadcom was involved. In fact, it’s fairly well established at this point that Google’s TPUs made extensive use of Broadcom IP. Apple is also rumored to be developing server chips for AI using Broadcom designs,” according to The Register.
Semiconductor Stocks, SOXQ Could Sizzle in Second Half
Recent government actions, including the CHIPS and STAR acts, could also be catalysts for chip foundry behemoth Taiwan Semiconductor (TSM) — SOXQ’s third-largest holding — and several of the ETF’s less glamorous constituents.
“The U.S.-China tech cold war has created a rare alignment of government support, innovation demand, and defensive valuations in semiconductors,” noted AI Invest. “Firms like Intel, TSMC, and Texas Instruments are not just surviving—they’re redefining global chip leadership. With the STAR Act poised to supercharge R&D, now is the time to position portfolios for the next wave of hardware-driven growth.”
Taiwan Semiconductor, which accounts for 8.16% of the SOXQ roster, is experiencing significant top-line growth,. That’s powered in large part by its AI exposure. In a recent note to clients, Needham analyst Charles Shi estimated Taiwan Semiconductor’s overall sales will increase from $87.9 billion in 2024 to $114 billion this year, $130 billion in 2026, and $160 billion in 2027. The foundry operator’s AI revenue is forecast to jump from $26 billion this year to $33 billion in 2026. It’s forecast to jump to $46 billion in 2027, according to the Needham analyst.
For SOXQ and chip stocks such as Nvidia, Broadcom, and Taiwan Semi, another second-half positive to consider is that, as of yet, there’s no evidence AI hyperscalers are looking to reduce those expenditures. If the U.S. economy proves solid or makes strides, it’s possible AI expenditures could modesty exceed expectations, potentially providing further ballast to ETFs like SOXQ.
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