NVDA - SMH: Nvidia Concentration Risk

2024-03-23 05:09:45 ET

Summary

• The VanEck Semiconductor ETF performed well due to its holdings in leading semiconductor companies, particularly Nvidia and AMD.
• Increased competition in the AI chip market poses a risk to SMH, especially if Nvidia's performance reverts to the mean.
• SMH's heavy allocation to Nvidia makes it vulnerable to any drop in Nvidia's stock price, highlighting the need for increased diversification.

Investment Thesis

The VanEck Semiconductor ETF ( SMH ) has demonstrated remarkable performance, with a year-to-date daily total return of 31.03% and a 1-year daily total return of 81.45% as of March 22nd. SMH’s success can be attributed to its significant holdings in leading semiconductor companies, particularly Nvidia ( NVDA ) and Advanced Micro Devices ( AMD ), which have been at the forefront of the AI chip market. Nvidia, with a 20.90% weight in SMH as of the time of this writing, has been a standout performer??....

For further details see: