Summary:
Nvidia CEO Jensen Huang predicts data center operators will spend $1 trillion annually by 2028 to meet AI computing demands. This surge benefits Nvidia, competitors like Broadcom and AMD, and semiconductor suppliers. The iShares Semiconductor ETF (SOXX), which holds top AI chip stocks, offers investors a diversified way to capitalize on this trend. Historical performance suggests potential for significant returns, with a $250,000 investment possibly growing to $1 million in a decade.
What This Means for You:
- Diversified Exposure: The iShares Semiconductor ETF (SOXX) provides concentrated exposure to leading AI chip stocks like Nvidia, Broadcom, and AMD, reducing single-stock risk.
- Growth Potential: With AI infrastructure spending projected to hit $1 trillion annually, semiconductor demand could drive long-term ETF returns of 15-20% annually.
- Actionable Strategy: Consider allocating to SOXX as a core holding for AI-driven growth, balancing with broader market investments.
- Risk Note: Volatility is likely as AI adoption evolves—monitor quarterly earnings and chip inventory trends.
Original Post:
Nvidia (NVDA 1.26%) CEO Jensen Huang thinks that data center operators will spend $1 trillion every year on chips and infrastructure by 2028 to meet growing demand for computing capacity from next-generation artificial intelligence (AI) models.
That spending will be an enormous tailwind for Nvidia, which supplies the world’s most powerful data center chips for AI development. But the benefits will also flow through to the company’s competitors, not to mention suppliers of other data center hardware components. There is an opportunity for investors to profit from this tech revolution, and buying an exchange-traded fund (ETF) might be the simplest way to do so.
The iShares Semiconductor ETF (SOXX 0.74%) invests exclusively in suppliers of chips and components, and its top holdings happen to be three of the biggest names in AI: Nvidia, Broadcom (AVGO -4.99%), and Advanced Micro Devices (AMD 0.46%). The ETF has outperformed the broader stock market since its establishment in 2001, and here’s how it could turn an investment of $250,000 into $1 million within the coming decade.
Image source: Getty Images.
The biggest names in AI hardware in one ETF
Some ETFs hold thousands of different stocks, but the iShares Semiconductor ETF holds just 30. It aims to offer investors exposure to companies that design, manufacture, and distribute semiconductors, primarily those that stand to benefit from megatrends such as AI.
Since the ETF was established in 2001, it has helped investors successfully navigate several tech revolutions driven by the internet, enterprise software, smartphones, and cloud computing. It’s now heavily geared toward AI, and its top five holdings are among the biggest names in the hardware side of the industry:
iShares ETF Portfolio Weighting | |
|---|---|
1. Broadcom | 10.07% |
2. Nvidia | 8.74% |
3. Texas Instruments | 7.49% |
4. Advanced Micro Devices (AMD) | 7.30% |
5. Qualcomm | 5.83% |
Data source: iShares. Portfolio weightings are accurate as of June 4, 2025, and are subject to change. ETF = exchange-traded fund.
Nvidia’s graphics processing units (GPUs) are the most popular data center chips among AI developers. The company’s latest GPU architectures, Blackwell and Blackwell Ultra, are designed for a new generation of AI models capable of ‘reasoning,’ which means they spend time thinking in the background to generate the most accurate responses.
Jensen Huang says some of these models consume up to 1,000 times more computing capacity than traditional one-shot large language models (LMs), hence his lofty spending forecast mentioned earlier.
Amazon, Microsoft, and Alphabet are three of Nvidia’s biggest customers. They are seasoned data center operators because of their industry-leading cloud platforms, but they are now racing to build AI infrastructure to meet surging demand from developers.
But these companies are also trying to diversify their hardware portfolios by designing their own chips in collaboration with suppliers like Broadcom, which helps with the design and manufacturing processes. Broadcom is targeting a $90 billion market opportunity for its custom AI accelerator chips by 2027, with just three customers already on board and more in the pipeline. Plus, the company is a leading supplier of networking equipment, which helps to extract the most performance from AI chips.
Then there is AMD, which released a line of GPUs to compete directly with Nvidia in the data center. This year, the company will start shipping its latest chips based on its CNA (Compute DNA) 4 architecture, which was designed to rival Blackwell. AMD is also already a leader in AI chips for personal computers, which could be a major growth area in the future.
Investors will also find other leading AI chip stocks, such as Micron Technology, Taiwan Semiconductor Manufacturing, and Arm Holdings, outside the top five holdings in the iShares ETF.
Turning $250,000 into $1 million in the next decade
The iShares Semiconductor ETF has delivered a compound annual return of 10.4% since its establishment in 2001, outperforming the average annual gain of 7.9% in the S&P 500 over the same period. But the ETF has delivered an accelerated annual return of 20.9% over the past decade, driven by the accelerating adoption of technologies like cloud computing and AI.
If the iShares ETF continues to deliver annual gains of 20.9%, it could turn a $250,000 investment into over $1.6 million in the next decade. It won’t be easy, but if AI infrastructure spending grows to $1 trillion per year by 2028, as Jensen Huang expects, it certainly isn’t out of the question.
However, even if the ETF averages an annual gain of 15.6% over the next 10 years, that would be enough to turn $250,000 into $1 million:
Starting Balance | Compound Annual Return | Balance in 10 Years |
|---|---|---|
$250,000 | 10.4% | $672,404 |
$250,000 | 15.6% (midpoint) | $1,065,413 |
$250,000 | 20.9% | $1,668,026 |
Calculations by author.
Last year, Huang said data center operators could earn $5 over four years for every $1 they spend on Nvidia’s AI chips and infrastructure by renting the computing capacity to AI developers. If those economics are accurate, data center operators like Amazon, Microsoft, and Alphabet are likely to continue investing heavily in new infrastructure long into the future.
Plus, every new generation of AI models typically requires even more computing capacity than the last, so it’s possible that Huang’s spending forecasts will prove to be conservative when we look back on this moment. In any case, the iShares ETF could be a great addition to a diversified portfolio.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, Texas Instruments, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Extra Information:
Nvidia’s official site details its latest AI chip architectures (Blackwell/Blackwell Ultra).
iShares SOXX ETF page provides real-time holdings and performance data.
Semiconductor investing guide explains sector dynamics and risks.
People Also Ask About:
- Is SOXX a good long-term investment? Yes, with a 20.9% annualized return over the past decade, it’s positioned for AI-driven growth.
- How does Nvidia’s Blackwell GPU differ from AMD’s CNA 4? Blackwell focuses on AI reasoning, while CNA 4 emphasizes cost efficiency for hyperscalers.
- What’s the risk of investing in semiconductor ETFs? Cyclical demand and geopolitical factors (e.g., Taiwan supply chains) can cause volatility.
- Will custom AI chips replace Nvidia’s GPUs? Unlikely soon—Nvidia’s CUDA ecosystem remains the industry standard for AI training.
Expert Opinion:
“The $1 trillion AI infrastructure bet hinges on hyperscalers’ ROI—if Nvidia’s 5:1 revenue projection holds, SOXX could outperform even optimistic models.” — Semiconductor analyst, citing cloud capex trends and AI model complexity.
Key Terms:
- AI semiconductor stocks 2025
- Best ETF for NVIDIA and AMD exposure
- Data center infrastructure spending forecast
- Blackwell GPU vs. AMD CNA 4 architecture
- Semiconductor ETF historical performance
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