Tap This ETF to Play Chip Trio NVIDIA, Broadcom & Micron

The chip industry is red-hot this year, thanks to huge gains recorded by NVIDIA NVDA, Broadcom Inc AVGO and Micron MU. Nvidia is up about 180%, Broadcom has gained 60%, and Micron has jumped more than 75% in the year-to-date frame (as of Jun 20, 2024). We know that the rise of generative AI and its increasing applications have driven demand for powerful GPUs and other semiconductor components, which led to the rally in the trio.

Inside the Rise of NVIDIA, Broadcom & Micron

By now, NVIDIA is known to all for its relentless rally, driven by its prominence in the artificial intelligence space. It is now the most valuable company in the world. The company's success lies in its innovation and a huge market share of 80% in AI chips for data centers. Demand for NVIDIA's H100 accelerators has been on a surge..

Early this month, the AI chipmaker unveiled a high-powered version of its Blackwell chip — called the Blackwell Ultra — slated to release in 2025, followed by a new AI chip platform, Rubin, in 2026. The company will debut an Ultra version of Rubin in 2027. Some analysts believe NVIDIA is on track to become the first $10 trillion company. Further, NVIDIA completed a 10-for-1 stock split on Jun 7.

In mid-June, Broadcom reported upbeat results for its fiscal second quarter by beating on both lines. Many analysts raised the price forecast on the stock. Three out of 11 analysts raised their earnings forecasts for the current quarter over the past 7 days, while six upped their forecast for the full year.

Broadcom, too, announced a 10-for-1 stock split, which is set to take place in July 2024. Broadcom Inc. currently has an average brokerage recommendation of 1.20 on a scale of 1 (Strong Buy) to 5 (Strong Sell). Of the 30 recommendations deriving the current ABR, 27 are Strong Buy, representing 90% of all recommendations.

Zacks Rank #2 (Buy) Micron Technology is expected to report its earnings on Jun 26, 2024. The company has established itself as a leading global provider of semiconductor memory solutions. Positive developments such as improved inventory management in the data center sector and stabilization across other business areas, including automotive and industrial sectors, are driving revenue growth. The company expects prices for DRAM and NAND chips to rise next year, which would further boost its revenues.

Over the past seven days, two out of seven analysts upped their earnings forecast for the current quarter. Micron currently has an ABR of 1.15. Of the 27 recommendations deriving the current ABR, 24 are Strong Buy and two are Buy.

How to Play Trio With One Product?

The pureplaychip fund Invesco PHLX Semiconductor ETF SOXQ invests 11.63% weight in NVIDIA, 8.83% weight in Broadcom and 4.91% weight in Micron, taking the first, third and sixth positions in the fund, respectively. The fund charges 19 bps in fees. The fund has a P/E of 31.38X, in line with the Invesco QQQ Trust QQQ's P/E of 32.75X, indicating that the ETF SOXQ is not too pricey.

Investors should note that this ETF approach looks to be more risk-free than individual stock investing. Plus, investors can gain access to the trio with a single product. The fund has gained 39.8% this year and 54% past year.

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