Nvidia (NASDAQ: NVDA) pioneered the graphics processing unit (GPU) in 1999 to render computer graphics for gaming and multimedia purposes.

Since GPUs are able to parallel processing — meaning they will seamlessly perform multiple tasks at the identical time — also they are ideal for compute-intensive workloads like machine learning and artificial intelligence (AI) development. That led Nvidia to design recent GPU architectures for data centers, and the semiconductor industry is now at the center of the AI revolution.

Nvidia CEO Jensen Huang believes data center operators will spend $1 trillion constructing GPU-based AI infrastructure over the following five years. That is an incredible financial opportunity, not just for his company, but for your complete semiconductor industry.

The iShares Semiconductor ETF (NASDAQ: SOXX) holds every leading chip stock, so it might probably give investors exposure to that trend in a diversified way. In actual fact, here’s how the exchange-traded fund (ETF) could turn $400 monthly into $1 million over the long run.

Every top chip stock packed into one fund

The iShares Semiconductor ETF invests in U.S. firms that design, manufacture, and distribute chips — especially those poised to learn from powerful trends like AI. Although ETFs can hold tons of and even 1000’s of various stocks, the iShares Semiconductor ETF holds just 30, so it’s highly concentrated toward its singular theme.

Led by Nvidia, its top five holdings represent 37.9% of your complete value of its portfolio.

Data source: iShares. Portfolio weightings are accurate as of Oct. 14, 2024, and are subject to vary.

Nvidia was valued at $360 billion at the beginning of 2023. Lower than two years later, it’s now the second largest company on this planet, with a market capitalization of $3.2 trillion. The chip giant is delivering the revenue and earnings growth to support its incredible rise in value, thanks primarily to sales of its data center GPUs.

Within the recent fiscal 2025 second quarter (ended July 28), Nvidia generated $26.3 billion in data center revenue, which was a whopping 154% increase from the year-ago period. The strong results are more likely to proceed, because the corporate is about to start out shipping a recent generation of GPUs based on its Blackwell architecture. Blackwell GPUs promise an incredible leap in performance of as much as 30 times in comparison with Nvidia’s flagship H100 GPU, and Huang recently said demand for them is “insane.”

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Broadcom also plays a key role in AI data centers. It makes AI accelerators (a style of chip) for hyperscale clients, which usually include tech giants like Microsoft and Amazon. It also makes Ethernet switches just like the Tomahawk 5 and Jericho3-AI, which regulate how quickly data travels between GPUs and devices.

Advanced Micro Devices has emerged as a direct competitor to Nvidia within the GPU space. It is going to ship its recent MI350X data center chip, which is designed to compete directly with the Blackwell lineup, within the second half of 2025. But AMD also makes neural processors (NPUs) for private computers, which might handle AI workloads on-device, making a faster user experience. This could possibly be a giant opportunity for the corporate outside the info center.

Beyond its top five positions, the iShares Semiconductor ETF also holds other top AI chip stocks like Micron Technology, which supplies memory and storage chips designed increasingly for AI workloads, and Taiwan Semiconductor Manufacturing, which fabricates most of the GPUs designed by Nvidia and AMD.

Turning $400 monthly into $1 million

The iShares Semiconductor ETF has generated a compound annual return of 11.6% since its inception in 2001. Nevertheless, its compound annual return has accelerated to 24.5% during the last 10 years, due to the rapid adoption of compute-intensive technologies like cloud computing, enterprise software, and AI.

The table below highlights the returns an investor could earn with $400 monthly over 10 years, 20 years, and 30 years based on three different annual growth rates.

Calculations by writer.

It’s unlikely that the iShares Semiconductor ETF will deliver a median annual return of 24.5% over the following 30 years — and even over the following 10 years, for that matter. The law of huge numbers will eventually result in a deceleration in growth. Nvidia is experiencing that phenomenon without delay. Despite growing its data center revenue by 154% in its recent quarter, that was a much slower growth rate than the prior quarter just three months earlier, when its data center revenue jumped by 427%.

Nevertheless, even when the ETF reverts back to an annual return of 11.6%, that can still be enough to show $400 monthly into $1 million over 30 years. While nothing is guaranteed, that may be a more realistic expectation for investors.

Plus, ETFs will be very flexible. The iShares Semiconductor ETF will rebalance over time, so recent firms will find their way into its top holdings in the event that they are outperforming their peers, which can support further returns.

AI is more likely to be a game changer for the semiconductor industry over the long run. Goldman Sachs believes the technology will add $7 trillion to the worldwide economy in the approaching decade. If that is true, it’ll drive a consistent reinvestment into chips and infrastructure to fuel future growth cycles.

Nevertheless, there may be at all times a risk that AI will fail to live as much as the hype. That is why it is vital for investors to purchase the iShares Semiconductor ETF only as a part of a balanced portfolio.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Advanced Micro Devices, Amazon, Goldman Sachs Group, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, Texas Instruments, and iShares Trust-iShares Semiconductor ETF. The Motley Idiot recommends Broadcom and recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.

1 Super Semiconductor ETF That Could Turn $400 Per Month Into $1 Million, With Nvidia’s Help was originally published by The Motley Idiot