Every year, there are new and emerging trends in global investing. However, it can be difficult for investors to separate short-term crazes from long-term sustainable growth.
History tells us
History is filled with investment themes that captured the market's imagination, only to fall short of expectations.
From the dot-com boom of the late 1990s to the clean energy surge in the early 2020s, many sectors attracted significant capital before valuations became disconnected from fundamentals.
At the same time, some of the world's most successful long-term investments initially appeared speculative or overvalued, making it challenging to distinguish genuine opportunities from potential traps in real time.
For investors, the greatest challenge is rarely identifying exciting trends – it's determining whether current prices already reflect future growth, or whether the underlying businesses can continue to deliver.
With artificial intelligence driving unprecedented demand for computing power, semiconductor companies have become one of the market's standout performers.
A new report from VanEck has laid out the case for why this is more than just a flash in the pan, and rather a structural foundation for the AI boom.
What are semiconductors?
Semiconductors are the crucial components driving artificial intelligence (AI), electric cars and cloud computing.
Semiconductors are materials with the unique ability to regulate the flow of electricity, allowing them to either conduct or restrict electrical current as needed.
This property makes them the foundation of modern electronics. They are used to manufacture microchips that power everything from smartphones and computers to vehicles, industrial equipment, and medical devices.
In simple terms, semiconductors act as the "brains" of electronic devices, enabling the processing, storage, and transmission of information that powers today's digital world.
According to VanEck, they are becoming increasingly valuable in this digital age.
Why they have long-term upside
According to VanEck's report, across every industry from finance and biotech to entertainment and national defence the need for faster, smarter, and more efficient computing is intensifying.
The AI revolution has only accelerated this trend, creating a flywheel effect of model complexity, data growth, and infrastructure expansion.
To meet this insatiable appetite for computing, modern systems require an entire ecosystem of semiconductors working in harmony.
What makes this trend so compelling is its durability. Semiconductor demand is not tied to one product cycle or hype phase. It's a foundational requirement for digital transformation in nearly every domain. Whether training trillion-parameter AI models, simulating protein folding, or delivering real-time cloud services, the need for semiconductors is only deepening.
How to invest in the semiconductor industry
For investors looking to gain exposure, VanEck recently announced it is launching a new semiconductor focussed ASX ETF: VanEck Global Semiconductor ETF (ASX:SMHG).
Rather than attempting to pick individual winners in this ever-evolving sector, the VanEck Global Semiconductor ETF provides exposure to the top global semiconductor companies, spanning the entire industry value chain from chip design manufacturers and equipment firms.
Another option for investors to consider is the Global X Semiconductor ETF (ASX: SEMI).
It seeks to invest in companies that stand to potentially benefit from the broader adoption of tech-enabled devices that require semiconductors. This includes the development and manufacturing of semiconductors.
The post Should investors be targeting the semiconductor boom? appeared first on The Motley Fool Australia.
Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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