Stock-Split ETF Boosted by Nvidia Could Turn $500 Monthly Investment Into $1 Million

Stock-Split ETF Boosted by Nvidia Could Turn 0 Monthly Investment Into  Million

With $10 trillion in client funds in its custody, black rock is the world’s largest asset manager. It is also the parent company of iShares, which offers more than 1,400 exchange-traded funds (ETFs) to investors.

THE iShares Semiconductor ETF (NASDAQ:SOXX) manages a $12.9 billion portfolio of the world’s leading microchip stocks, many of which are operating at the forefront of the artificial intelligence (AI) revolution.

Stock-Split ETF Boosted by Nvidia Could Turn 0 Monthly Investment Into  Million

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The iShares Semiconductor ETF Just Completed a Stock Split

The iShares semiconductor ETFs has generated compound annual returns of 25.3% over the past 10 years, almost double the 13.1% annual returns of S&P500 index over the same period.

The ETF soared to $680 per share in March, making it rather expensive for many retail investors. In response, iShares conducted a 3-for-1 stock split that tripled the number of shares outstanding and reduced the price per share by two-thirds (to approximately $225 at the time of this writing). ).

The ETF is now more accessible to a broader investor base, which is great news as its momentum is likely to continue given the scale of opportunities in the AI ​​sector. Here’s how he could turn a $500 a month investment into over a million dollars in the long run, thanks to top stocks like Nvidia (NASDAQ:NVDA) And Advanced microsystems (NASDAQ:AMD).

Betting on the world’s biggest chip companies

Investors are likely familiar with AI-powered chatbots like ChatGPT, Gemini, and Claude, which can interpret and generate text, images, videos, and computer code. But it takes data centers full of advanced chips so developers can create, train and deploy AI models. Without this hardware, the software could not exist and function.

Nvidia designs the industry’s most powerful graphics processing units (GPUs) that are ideal for these purposes. THE the company is now worth $2.3 trillionand $1.5 trillion of that value was created in the last 12 months alone thanks to growing demand for its cutting-edge GPUs from data center operators like Microsoft, AmazonAnd Metaplatforms.

The iShares Semiconductor ETF holds 30 different stocks, but Nvidia is its largest holding. The ETF is heavily weighted toward its top five holdings, which represent 36.4% of its total portfolio value.

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Weighting of iShares Semiconductor ETFs

1.Nvidia

8.78%

2. Broadcom

7.84%

3. Advanced Micro Devices

7.21%

4. Qualcomm

6.44%

5. Intel

6.16%

Data source: iShares. Portfolio weightings as of March 28, 2024.

Broadcom is a leader in networking and server connectivity solutions for high-performance computing. Its Tomahawk 5 is a high-bandwidth data center switch designed to accelerate AI and machine learning workloads. Switches regulate how quickly data travels from one point to another, and when developers use thousands of powerful GPUs, that’s a key part of the equation.

AMD, on the other hand, is considered Nvidia’s closest competitor thanks to its latest data center GPUs, the MI300 series. The company also designs cutting-edge chips for AI-enabled personal computers.

A number of important chip stocks lie outside of the ETF’s largest holdings. Micron technology is a leading producer of memory (DRAM) and storage (NAND) chips, both essential for extracting maximum performance from data center hardware. Then there is Semiconductor manufacturing in Taiwanwhich is by far the largest third-party foundry, producing many of the most advanced chips on the market, including those designed by Nvidia and AMD.

Turn $500 a month into $1 million

The iShares Semiconductor ETF was established in 2001 and has since generated a compound annual return of 11.6%. But the rapid rise of cloud computing and AI has led to a much faster average annual gain of 25.3% over the past 10 years.

The table below shows the potential returns an investor could earn by investing $500 each month in the ETF over 10 years, 20 years and 30 years, under three scenarios:

  • Scenario 1: The ETF continues to generate its long-term average annual gain of 11.6%.

  • Scenario 2: The ETF delivers an average annual gain of 18.4% (midpoint of scenarios 1 and 3).

  • Scenario 3: The ETF maintains its 10-year average and continues to generate annualized gains of 25.3%.

Monthly investment

Compound annual rate of return

Balance after 10 years

Balance after 20 years

Balance after 30 years

$500

11.6%

$113,941

$473,803

$1,615,361

$500

18.4%

$172,970

$1,243,879

$7,893,390

$500

25.3%

$272,381

$3,596,854

$44,247,291

Calculations by author.

Making monthly investments of $500 for 30 years would result in a portfolio worth more than $1.6 million, even with an average annual return of just 11.6%.

Many Wall Street firms believe AI could represent a multitrillion-dollar opportunity in the next decade alone. Goldman Sachs predicts that this technology will add $7 trillion to the global economy within 10 years, while consulting firm PwC estimates it will add $15.7 trillion to the global economy by 2030.

If either of these predictions fall within the right range, the iShares Semiconductor ETF will be a great place for investors to put their money. However, if AI fails to meet expectations, the ETF could underperform due to its high level of exposure to the sector. Therefore, holding shares of this fund as part of a balanced portfolio might be the way to go.

Should you invest $1,000 in iShares Trust – iShares Semiconductor ETF right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, 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 holds positions and recommends Advanced Micro Devices, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, Qualcomm and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the Broadcom, Intel, and iShares Trust-iShares Semiconductor ETF and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long 395 calls $ in January 2026 on Microsoft, short calls of $405 in January 2026 on Microsoft and short calls of $47 in May 2024 on Intel. The Motley Fool has a disclosure policy.

1 Stock Split ETF That Could Turn $500 a Month into $1 Million, With Help From Nvidia was originally published by The Motley Fool

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