From Nasdaq:

Semiconductors are key to artificial intelligence, and investors can access chip stocks via ETFs. The VanEck Semiconductor ETF (SMH) has performed well, with $11.7 billion in assets. Its construction is closely aligned with AI and big data holdings.

SMH’s top holdings include Advanced Micro Devices (AMD), Nvidia (NVDA), and Taiwan Semiconductor (TSM). Nvidia and Taiwan Semiconductor make up almost 30% of SMH. These companies have economic moats, making them less susceptible to disruption from AI.

Nvidia and Taiwan Semiconductor are both profitable, cash-generating, and well-positioned for turbulent economic climates. This makes SMH a valid AI investment, especially for those looking to access AI without paying high valuation premiums.

Morningstar expects significant market interest in AI and recommends accessing the theme through second-derivative plays. This means investing in companies that can embed AI into their workflow and drive new revenue growth opportunities.

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Read more: AI Supports Case for This Semiconductor ETF