Shares of Nvidia (NVDA) rallied in Wednesday’s after-hours session after the semiconductor giant unveiled financial guidance that hints at the artificial intelligence (AI) boom still being in its early innings.
Clearly, that supports semiconductor exchange traded funds that de facto Nvidia proxies, including the VanEck Semiconductor ETF (SMH). As of May 21, the $19.80 billion SMH allocated 20.80% of its weight to Nvidia. Of the 376 ETFs with exposure to Nvidia, just two have larger weights to the stock than SMH.
That’s good news for SMH investors. Nvidia forecast second-quarter sales of $28 billion. That’s well ahead of the consensus forecast of $26.8 billion. For the time being, that might allay concerns that the stock is richly valued and that with a market capitalization of $2.3 trillion upside from here is limited.
Nvidia Bullish on AI Growth
Over the past several years, perhaps more than any other large-cap stock, Nvidia has become synonymous with the AI revolution. And it looks like it will maintain that status for some time to come.
“The next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence,” said founder and CEO Jensen Huang in a statement. “AI will bring significant productivity gains to nearly every industry. And help companies be more cost- and energy-efficient while expanding revenue opportunities.”
Bolstering the case for the stock and ETFs such as SMH were comments from Huang highlighting strong data center growth buoyed by surging generative AI demand. Additionally, generative AI has added a new demand layer to the data center thesis, complementing cloud computing.
“We are poised for our next wave of growth. The Blackwell platform is in full production and forms the foundation for trillion-parameter-scale generative AI. Spectrum-X opens a brand-new market for us to bring large-scale AI to Ethernet-only data centers. And NVIDIA NIM is our new software offering that delivers enterprise-grade, optimized generative AI to run on CUDA everywhere — from the cloud to on-prem data centers and RTX AI PCs — through our expansive network of ecosystem partners,” added Huang.
Finally, the company also announced a 10-for-1 stock split. That means if the stock split now, its price would be pared to around $95. That could compel more retail investors to embrace the shares, potentially providing a small boost for SMH along the way.
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