Chip ETFs in Focus on New Generation AI Product Launches

Big chipmakers have been racing to introduce new-generation artificial intelligence chips. There have been announcements from Intel INTC, Advanced Micro Devices AMD and Nvidia NVDA. Intel on Tuesday announced new Xeon 6 processors during the Computex tech conference in Taiwan.

Before this, Advanced Micro Devices introduced its latest AI processors at the Computex technology trade show in Taipei. CEO Lisa Su presented the MI325X accelerator, scheduled for release in the fourth quarter of 2024. This move is part of AMD's strategic plan to challenge industry leader NVIDIA in the competitive AI semiconductor market.

Growing Demand for AI Chips

The surge in generative AI programs has created a high demand for advanced chips used in AI data centers. California-based AMD is striving to compete with Nvidia, which currently dominates about 80% of the AI semiconductor market.

Intel is trying to catch up to NVIDIA and AMD, after having largely been unnoticed in the AI frenzy. Tech giants like Meta, Microsoft, Tesla and Google are mostly buying as many NVIDIA chips as possible.

Following NVIDIA's lead, Intel said that its Xeon 6 processor will deliver better performance and power efficiency for high-intensity data center workloads as compared with its predecessor, CEO Pat Gelsinger said during the Computex tech conference in Taiwan, as quoted on CNBC.

Meanwhile, AMD introduced the MI350 series, expected in 2025, promising a 35-fold improvement in inference performance compared to the current MI300 series. Additionally, the MI400 series, based on a new architecture called "Next," is set to launch in 2026.

Meanwhile, NVIDIA also unveiled its next generation of AI chips – Rubin — which features eight stacks of HBM4 memory. The platform, available in 2026, includes new GPUs for AI training and deployment, and a central processor named "Vera."

The Rubin AI platform will use HBM4 memory, with Rubin Ultra featuring 12 HBM4 stacks. Notably, NVIDIA's accelerated computing technology offers significant cost and energy savings. Investors should note that AMD has plans to release new AI chips on an annual basis. NVIDIA is also committed to releasing new AI chip models annually.

Investor Interest and Market Performance

Investors are keenly watching AMD and NVIDIA for long-term updates on AI chip developments. AMD's shares have more than doubled since early 2023, although this growth is modest compared to NVIDIA's seven-fold surge in the same period. AMD anticipates AI chip sales of about $4 billion for 2024, a $500 million increase from previous estimates.

Tap Trio With These ETFs

Investors can access both chip makers through a single investment. This includes ETFs like Strive U.S. Semiconductor ETF SHOC, AXS Esoterica NextG Economy ETF WUGI, Invesco PHLX Semiconductor ETF SOXQ and TrueShares Technology, AI & Deep Learning ETF LRNZ.

AMD has about 7.23% exposure to SHOC, 6.57% focus on WUGI, 6.31% focus on SOXQ, and 6.11% focus on LRNZ. In contrast, NVDA has about 31% exposure to both SHOC and WUGI, 15.27% focus on SOXQ, and 16.57% focus on LRNZ. Meanwhile, Intel has 4.16% focus on iShares Semiconductor ETF SOXX and 5.2% exposure to First Trust NASDAQ Semiconductor ETF FTXL.

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