Nvidia says this stock split ETF can help you turn $200,000 into $1 million in 10 years.

Artificial intelligence (AI) could be one of the most valuable opportunities in history for investors, and the semiconductor industry is at the center of it all. nvidia (NVDA -1.54%) CEO Jensen Huang believes there is as much as $1 trillion in existing data center infrastructure that needs to be upgraded with new chips to support the demands of AI developers.

Nvidia is currently leading this change, but it is not the only beneficiary of this opportunity. However, rather than picking which stocks will be winners or losers in the long run, investors should consider buying exchange-traded funds (ETFs).

that much iShares Semiconductor ETF (SOXX -2.09%) is a specialized fund that invests exclusively in the world’s leading chip companies, with Nvidia being its largest holding.

Image source: Getty Images.

iShares Semiconductor ETF (SOXX) has completed its stock split.

The SOXX ETF has achieved an impressive average annual return of 30.4% over the past five years. This is almost three times the annual return. S&P 500 index for the same period.

In fact, the SOXX ETF recently soared to $680 per share, making it somewhat difficult for smaller investors to access. As a result, iShares implemented a 1-for-3 stock split in March, tripling the number of SOXX shares in circulation and organically lowering the stock price by two-thirds. This has had no impact on the underlying value of the ETF, but it means investors can now buy for $217 (as of this writing).

Given the significant AI opportunity for the chip sector, the SOXX ETF’s momentum is likely to continue for a long time to come. Here’s how you can turn your $200,000 investment into $1 million in 10 years. But don’t fret. Regardless of the initial capital amount, investors can earn 5x returns if this opportunity is successful.

All the major chip stocks conveniently packaged in one ETF.

Nvidia designs the world’s most powerful graphics processing units (GPUs) for AI workloads. These are installed inside centralized data centers operated by tech giants such as: microsoft and AmazonWe sell computing power to developers so they can build, train, and deploy AI models.

Nvidia’s industry-leading H100 GPUs drove the company’s data center revenue to $47.5 billion in fiscal 2024 (ended Jan. 28), a 217% increase year-over-year. This hardware is the main reason why Nvidia is now a $2.2 trillion company. And considering the new, more advanced H200 GPUs that are being released now, that momentum looks set to continue.

The SOXX ETF owns shares of 30 different chip companies, but is heavily weighted to its top five holdings, which account for 35.4% of the portfolio’s total value.

Data source: iShares. Portfolio weights are accurate as of April 26, 2024 and are subject to change.

The ETF’s second-largest holding is Broadcom, a leader in networking and connectivity hardware for data centers. For example, the Tomahawk 5 switch is designed to increase the speed at which data moves from one point to another. This is critical in data centers where thousands of GPUs collect enormous amounts of information every second. Broadcom also develops AI software across multiple sectors through its subsidiaries, including VMWare and Symantec.

Advanced Micro Devices is another major holding in the SOXX ETF. The company recently launched its MI300 data center chip to compete with Nvidia and has already attracted large customers such as Microsoft. trustand meta platform. Additionally, AMD is a leader in the emerging AI-based personal computing market. Millions of laptops and devices have already been sold using the company’s Ryzen AI chips.

The top five includes Micron Technology, a leading producer of memory (DRAM) and storage (NAND) chips. The HBM3E memory solution was chosen by Nvidia to power its new H200 GPUs primarily because of its incredible efficiency. It consumes 30% less power than competing solutions. This is a key consideration for data center operators because electricity is one of their biggest costs.

In addition to the top five, the SOXX ETF holds the following popular chip stocks: intel and texas instruments. also has a stake in Taiwan semiconductor manufacturing industryIt is responsible for making more than half of the world’s chips, including those designed by Nvidia and AMD.

SOXX ETF could go from $200,000 to $1 million in 10 years.

The SOXX ETF has returned 53.5% over the past year, dwarfing the S&P 500’s 22.3% return and even outpacing the 33.9% return of technology-focused ETFs. Nasdaq-100 index.

And its outstanding performance is no exception. The ETF has achieved an average annual return of 30.4% over the past five years and 25.3% over the past 10 years. Technologies such as cloud computing and AI have become mainstream over the past decade, which explains their incredible performance.

In addition to the $1 trillion opportunity in the data center industry predicted by Jensen Huang, all computers and devices could be equipped with AI capabilities over the long term, so it is indeed possible to generate sustained market-beating returns from the SOXX ETF.

However, even if the SOXX ETF delivers a more modest annual return of 15% over the next 10 years, it would still deliver significant financial gains to investors. The table below shows how different rates of return affect an initial investment of $200,000.

Calculation by author.

The SOXX ETF is a great way for investors to take advantage of AI opportunities over the long term. Especially after the recent stock split, it has become much more accessible to people of all experience levels.