Could this ASX ETF be the best way to invest in the AI boom?

Artificial intelligence (AI) has become one of the biggest investment themes in the world.

But picking the winners is not easy. Some companies will dominate more than others and valuations across the sector can move quickly when sentiment changes.

That is why the Global X Semiconductor ETF (ASX: SEMI) could be worth a closer look.

A different way to play AI

This ASX exchange traded fund (ETF) gives investors exposure to the companies making the chips, equipment, and technology that sit behind the AI buildout.

That is important because AI needs enormous amounts of computing power, memory, networking, and advanced manufacturing capacity.

This puts semiconductor companies right at the centre of the trend. Whether the winners are cloud giants, software platforms, robotics companies, or autonomous vehicle businesses, many of them will need more chips to keep growing.

The fund’s holdings include Taiwan Semiconductor Manufacturing Co (NYSE: TSM), NVIDIA (NASDAQ: NVDA), and ASML Holding (NASDAQ: ASML). These businesses sit at different points of the semiconductor supply chain, from chip design and manufacturing to the highly specialised equipment needed to produce advanced chips.

Why it could be attractive

The semiconductor industry has historically been cyclical, but the current demand backdrop looks unusually powerful.

AI models are becoming larger, data centres are requiring more powerful hardware, and companies across the world are racing to build the infrastructure needed for next-generation computing.

This doesn’t mean it will be smooth sailing for the ASX ETF. Semiconductor shares can be volatile, especially when investors worry about valuations, inventory cycles, or capital spending.

But over the long term, the need for more computing power looks difficult to ignore.

The fund also gives Australian investors exposure to an area that is not well represented on the ASX. Local investors can own banks, miners, supermarkets, and property trusts easily. Getting meaningful exposure to global chip leaders is much harder without looking offshore.

Is it a buy?

This ASX ETF will not be suitable for everyone. It is concentrated in one industry, which means it can fall sharply if the semiconductor cycle turns.

But for investors comfortable with volatility, it offers a great way to gain exposure to one of the most important parts of the global technology stack.

If AI continues to reshape the economy, the companies supplying the hardware behind it could remain in demand for many years. That makes this fund arguably one of the more interesting ASX ETF options for growth-focused investors.

The post Could this ASX ETF be the best way to invest in the AI boom? appeared first on The Motley Fool Australia.

More reading

• What are the best performing thematic ASX ETFs right now?
• The growing case for this semiconductor ASX ETF
• ASX investors: Are you overinvested in the Magnificent 7 without knowing it?
• If I could buy only one ASX ETF for the next 10 years, this could be it
• Could this ASX ETF be the easiest way to invest in AI?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia has recommended ASML and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.