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1 Stock-Split ETF That Can Turn $500 a Month into $1 Million, With the Help of Nvidia

With $10 trillion in customer funds in custody, Black rock is the largest asset manager in the world. It is also the parent company of iShares, which offers more than 1,400 exchange-traded funds (ETFs) to investors.

The iShares Semiconductor ETF (NASDAQ: SOXX) manages a $12.9 billion portfolio filled with the world’s leading chip stocks, many of which are at the forefront of the artificial intelligence (AI) revolution.

A digital representation of a circuit board with a chip with the letters AI embossed.

Image source: Getty Images.

The iShares Semiconductor ETF just completed a stock split

The iShares Semiconductor ETF has delivered a compound annual return of 25.3% over the past decade, nearly doubling the 13.1% annual return of the S&P500 index over the same period.

The ETF rose to $680 per share in March, making it quite expensive for many retail investors. In response, iShares executed a 3-for-1 stock split, tripling the number of shares in issue and dropping the price per share by two-thirds (to about $225 at the time of writing).

The ETF is now more accessible to a broader investor base, which is great news as momentum is likely to continue given the sheer size of the opportunity in the AI ‚Äč‚Äčindustry. Here’s how it can turn a $500 per month investment into more than $1 million in the long run, thanks to top holdings like Nvidia (NASDAQ: NVDA) And Advanced micro devices (NASDAQ: AMD).

Betting on the best chip companies in the world

Investors are likely familiar with AI-powered chatbots such as ChatGPT, Gemini and Claude, which can interpret and generate text, images, videos and computer code. But developers need data centers full of advanced chips to build, train and deploy AI models. Without that hardware behind it, the software couldn’t exist and function.

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Nvidia designs the most powerful graphics processing units (GPUs) in the industry, which are ideal for these purposes. The company is now worth $2.3 trillion, and $1.5 trillion of that value was created in the last twelve months alone thanks to rising demand for advanced GPUs from data center operators like Microsoft, AmazonAnd Metaplatforms.

The iShares Semiconductor ETF holds 30 different stocks, but Nvidia is the largest holding. The ETF has a heavy weighting in its top five investments, which represent 36.4% of the total value of its portfolio.

stock

Weighting of iShares Semiconductor ETF

1. Nvidia

8.78%

2. Broadcom

7.84%

3. Advanced micro devices

7.21%

4. Qualcomm

6.44%

5. Intel

6.16%

Data source: iShares. Portfolio weightings as of March 28, 2024.

Broadcom is a leader in network and server connectivity solutions for high-performance computing. The Tomahawk 5 is a high-bandwidth data center switch designed to accelerate AI and machine learning workloads. Switches control how quickly data moves from one point to another, and when developers use thousands of powerful GPUs, that’s an important part of the equation.

AMD, on the other hand, is considered Nvidia’s biggest competitor thanks to its latest data center GPUs, the MI300 series. The company also designs industry-leading chips for AI-enabled personal computers.

A number of key chip stocks are outside the ETF’s largest holdings. Micron technology is a top manufacturer of memory (DRAM) and storage (NAND) chips, both of which are crucial for getting maximum performance from data center hardware. Then there is Taiwanese semiconductor manufacturingwhich is by far the largest third-party foundry, producing many of the most advanced chips on the market, including chips designed by Nvidia and AMD.

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Turn $500 a month into $1 million

The iShares Semiconductor ETF was founded in 2001 and has since delivered a compound annual return of 11.6%. But the rapid rise of cloud computing and AI has led to a much faster average annual gain of 25.3% over the past decade.

The table below shows the potential returns an investor could earn by investing $500 in the ETF every month over a period of 10 years, 20 years and 30 years, under three scenarios:

  • Scenario 1: The ETF continues to deliver its long-term average annual gain of 11.6%.

  • Scenario 2: The ETF delivers an average annual gain of 18.4% (midpoint of scenarios 1 and 3).

  • Scenario 3: The ETF maintains its 10-year average and continues to post an annualized gain of 25.3%.

Monthly investment

Compound annual return percentage

Balance after 10 years

Balance after 20 years

Balance after 30 years

$500

11.6%

$113,941

$473,803

$1,615,361

$500

18.4%

$172,970

$1,243,879

$7,893,390

$500

25.3%

$272,381

$3,596,854

$44,247,291

Calculations by author.

A monthly investment of $500 for 30 years would result in a portfolio worth over $1.6 million, even with an average annual return of only 11.6%.

Many Wall Street firms believe that AI alone could create a multi-trillion dollar opportunity in the next decade. Goldman Sachs predicts the technology will add $7 trillion to the global economy within a decade, while consultancy PwC estimates it will add $15.7 trillion to the global economy by 2030.

If any of these predictions hold true, the iShares Semiconductor ETF will be a great place for investors to put their money. However, if AI fails to live up to the hype, the ETF could underperform due to its high level of sector exposure. Therefore, owning shares of this fund as part of a balanced portfolio could be the right choice.

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Should you invest $1,000 in iShares Trust – iShares Semiconductor ETF now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom, Intel and iShares Trust-iShares Semiconductor ETF and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and briefly May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.

1 Stock-Split ETF That Could Turn $500 a Month Into $1 Million, With Help from Nvidia was originally published by The Motley Fool

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