ETFs
Tap This ETF to Play the NVIDIA, Broadcom, and Micron Chip Trio
The chip industry is buzzing this year, thanks to huge gains by Nvidia NVDA, Broadcom Inc. AVGO and Micron MU. Nvidia is up about 180%, Broadcom is up 60%, and Micron is up over 75% year to date (as of June 20, 2024). We know that the rise of generative AI and its growing applications have driven demand for powerful GPUs and other semiconductor components, leading to the trio’s rally.
In the rise of NVIDIA, Broadcom and Micron
Now, Nvidia is known by all for its incessant rally, driven by its importance in the field of artificial intelligence (AI). It is today the most valuable company in the world. The company’s success lies in its innovation and its massive 80% market share in data center AI chips. Demand for NVIDIA’s H100 accelerators is surging (read: ETFs to mine as NVIDIA becomes most valuable company).
Earlier this month, the AI chipmaker unveiled a high-power version of its Blackwell chip – called Blackwell Ultra – scheduled for release in 2025, followed by a new AI chip platform, Rubin, in 2026. The company will launch an Ultra version of Rubin in 2027. Some analysts believe that NVIDIA is on track to become the first $10 trillion company. Additionally, NVIDIA completed a 10-for-1 stock split on June 7.
In mid-June, Broadcom reported upbeat results for its fiscal second quarter beating on both lines. Many analysts have raised their price forecasts for the stock. Three out of 11 analysts have raised their earnings forecasts for the current quarter in the past 7 days, while six have raised their forecasts for the full year.
Broadcom also announced a 10-for-1 stock split, which is expected to occur in July 2024. Broadcom Inc. currently has an average brokerage recommendation (ABR) of 1.20 on a scale of 1 (strong buy) to 5 (Strong sale). Of the 30 recommendations that come from the current ABR, 27 are strong buys, accounting for 90% of all recommendations (read: Broadcom Jumps on Q2 Earnings: ETF to Buy).
Zacks Rank #2 (Buy) Micron technology is expected to report earnings on June 26, 2024. The company has established itself as one of the world’s leading providers of semiconductor memory solutions. Positive developments such as better inventory management in the data center sector and stabilization in other business sectors, notably the automotive and industrial sectors, are driving revenue growth. The company expects DRAM and NAND chip prices to rise next year, which would further increase its revenue.
Over the past seven days, two out of seven analysts have revised their earnings forecasts upward for the current quarter. Micron currently has an ABR of 1.15. Of the 27 recommendations that arise from the current ABR, 24 are strong buys and two are buys.
The story continues
How to play as a trio with a single product?
The pureplaychip fundInvesco PHLX Semiconductor ETF SOXQ invests 11.63% in NVIDIA, 8.83% in Broadcom and 4.91% in Micron, taking the first, third and sixth positions in the fund, respectively. The fund charges 19 basis points in fees. The fund has a P/E of 31.38X, in line with the Invesco QQQ Trust (QQQ) of 32.75X, indicating that the SOXQ ETF is not too expensive (read: 4 Best ETF Areas of the Last Week).
Investors should note that this ETF approach appears to be more risk-free than investing in individual stocks. Additionally, investors can access the trio with just one product. The fund has gained 39.8% this year and 54% last year.
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Micron Technology, Inc. (MU): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Broadcom Inc. (AVGO): Free Stock Analysis Report
Invesco PHLX Semiconductor ETF (SOXQ): ETF Research Reports