The chip market has been a big part of what has driven the stock market. Nvidia Corp.’s huge sales growth has helped a lot—the company’s most recent quarterly revenue was 4.5 times what it was two years ago.
It’s not likely that Nvidia NVDA -1.02% will grow at that fast of a rate in the future, but the company is still expected to grow quickly. It came in at number four on our list of chip companies whose sales are expected to grow the fastest through calendar year 2026.
A lot of things can change when it comes to Nvidia shares. Because the company has been getting a lot of press lately, the share price already reflects some of the excitement about its future growth. Investors are even pointing out that Nvidia’s growth is slower than it used to be, even though it is still faster than almost every other company in the same field.
But Nvidia shares are down from their highs in June, and the whole chip industry is down from July. Even though there have been pullbacks, experts still think that shares will go up a lot, as today’s screen will show.
SOXX is the standard for stocks in semiconductors.
After polling analysts through FactSet, we did a different kind of stock screen today for the semiconductor business. It was based on ratings and average price targets. Almost all analysts who work for brokerage firms set price goals for the next 12 months based on what they think the companies’ financial results will be.
Now, before we look at the screen, let’s see how the iShares Semiconductor ETF SOXX 0.12% has done. This fund holds all 30 stocks that make up the PHLX Semiconductor Index SOX 0.03%.
Compare SOXX’s five-year total return to that of the SPDR S&P 500 ETF SPY 0.04%, which tracks the S&P 500 SPX 0.03%, in this chart. The date given is Monday.
Returns include dividends that were saved and are minus the costs of running the exchange-traded funds. In the past five years, SOXX has more than doubled the return of SPY. However, buyers have had to be patient because this group of stocks tends to be more volatile than the market as a whole. The ride can be rough. For instance, SOXX went down 35.1% in 2022, while SPY went down 18.2%.
Investors have also seen how volatile the business has been more recently. SOXX is 17% lower than its all-time high in July.
Based on market value, the S&P 500 is weighted. The Nasdaq Inc. NDAQ -0.82% keeps the PHLX Semiconductor Index up to date. It uses a modified weighting method that limits the biggest three components to 12%, 10%, and 8%, respectively. The index is rebalanced every three months. If you want to know more about how the weightings are changed, click here. As of Monday night, Broadcom Inc. AVGO -0.95% had the most weight in SOXX, with 10.51%. Nvidia came in second with 9.07%, and Advanced Micro Devices Inc. AMD -0.83% was third with 7.76%.
Now, here’s a graph that shows the results over the last five years, from September 16, 2014, to September 16, 2019:
And now, to illustrate the compounding effect for dedicated long-term investors, here is a comparison of 10-year returns for SOXX and SPY through Monday:
For 10 years through Monday, SOXX’s total return was more than triple that of SPY.
