The Daily Breakdown looks at the AI trio — Nvidia, Taiwan Semi, and Broadcom — that are driving the rally in tech stocks.
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What’s Happening?
It’s been a blistering summer — and specifically, a blistering couple of days — for AI- and chip-related stocks.
Broadcom has had two sessions in the last week where shares rallied more than 9%, and both of those rallies sent the stock to record highs. Taiwan Semi had rallied in six straight sessions until Thursday and also hit new record highs in the process, while Nvidia continues to consolidate its recent gains and remains more than 100% above its April lows.
Put these three together and their combined market caps eclipse $7 trillion. That’s a big number, especially in one industry. That’s not considering Oracle’s meteoric rise — up almost 40% this week to a market cap of ~$900 billion — nor does it count the many other chip and AI infrastructure stocks out there.
With AI remaining a dominant theme in tech and investing, these names are forging the path forward and solidifying themselves as the dominant players within the industry.
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The Setup — Semiconductor ETF
For investors looking for exposure to semiconductors but don’t want the task of buying individual stocks, there’s always an ETF like the SMH. Nvidia, Broadcom and Taiwan Semi are the top three holdings of the fund and account for a weighting of almost 45%. Advanced Micro Devices and Micron round out the top five.
As you can see on the weekly chart above, the SMH recently made a new high. It continues to find support near $280, which was resistance in the summer of 2024. If that area remains support, bulls will look for a potential move up through $300. However, if support fails, more selling pressure could ensue — potentially putting the $260 level in play.
Options
Investors who believe shares will move higher over time may consider participating with calls or call spreads. If speculating on a long-term rise, investors might consider using adequate time until expiration.
For investors who would rather speculate on the stock decline or wish to hedge a long position, they could use puts or put spreads.
To learn more about options, consider visiting the eToro Academy.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.