Semiconductor giants surge as AI demand fuels record ETF growth
The semiconductor sector continues its rapid growth, driven by surging demand for artificial intelligence. The VanEck Semiconductor ETF (SMH) has seen its top holdings expand significantly over the past year. Analysts now predict strong short-term returns for the fund as the AI boom accelerates.
Between March 2025 and March 2026, the market value of key semiconductor firms soared. TSMC's market capitalisation climbed from around $900 billion to $1.3 trillion, a 44% increase. NVIDIA saw an even sharper rise, jumping from $2.4 trillion to $4.1 trillion—up 71%. Broadcom, ASML, and AMD also posted gains of 36%, 30%, and 28% respectively.
These companies dominate the VanEck Semiconductor ETF, with TSMC holding a 27% weight, followed by NVIDIA at 22%. Broadcom, ASML, and AMD account for 8%, 5%, and 4% of the fund. TSMC's share of the global foundry market also grew from 62% to 65% over the same period. The ETF's trailing 12-month price-to-earnings (P/E) ratio stands at 43, but its forward P/E drops to 23. This suggests investors expect earnings to rise sharply. Tech sector profits are forecast to outpace all other S&P 500 industries in 2026 and 2027. Analysts believe the AI infrastructure buildout remains in its early phases, with further expansion ahead.
The VanEck Semiconductor ETF is positioned for above-average returns in the near term. Its largest holdings have already seen massive valuation increases, yet the broader semiconductor cycle shows no signs of slowing. With AI demand still growing, the sector's earnings outlook remains strong for the next two years.
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