Tech ETFs March Higher as AMD Boosts AI Hype

Semiconductor ETFs, AI ETFs and the broader technology sector remain strong even after giant gains in 2023 have pushed prices for many tech stocks into the stratosphere. How do these high growth tech ETFs continue to outperform, even as investors increasingly wonder how much further the sector can move higher from these nosebleed levels?  

We can summarize the 2023 tech growth story in two words: artificial intelligence. 

AMD’s ‘Advancing AI’ Event Boosts AI Hype, Tech ETFs 

Last week’s move higher for technology ETFs, especially those focusing on semiconductors, can be largely attributed to statements made at Thursday’s Advancing AI event put on by Advanced Microdevices, Inc. (AMD). 

Other than AMD’s self-promotion around its new MI300x AI accelerator, the news that seemed to attract broader investor enthusiasm was their updated estimates on AI growth in years to come. AMD expects its total addressable market to reach approximately $400 billion by 2027, which is a large increase from its $150 billion forecast it gave in August. 

AMD stock jumped 7% on the news Thursday while one of the largest semiconductor ETFs with high AMD exposure, the iShares Semiconductor ETF (SOXX), jumped nearly 3% on the same day. 

Tech ETFs’ 2023 Performance Driven by AI Excitement 

Since semiconductors power artificial intelligence, semiconductor companies like AMD and Nvidia Corporation (NVDA) are greatest benefactors of AI hype in 2023. NVDA is up more than 220% year-to-date while AMD has gained over 100%.  

The largest semiconductor ETF by AUM, the VanEck Semiconductor ETF (SMH), is up more than 60% this year. The largest artificial intelligence ETF, the Global X Robotics & Artificial Intelligence ETF (BOTZ) ETF, has returned 30% and the broader tech sector has gained more than 50% in 2023, as measured by the Technology Select SPDR ETF (XLK).  

For reference, the U.S. stock market, as measured by the SPDR S&P 500 ETF Trust (SPY),has gained approximately 20% for the year. The largest sector represented in the S&P 500 is technology, which is about 28% of the index.

Bottom Line on AI and Tech ETFs 

If semiconductor ETFs and other tech ETFs with heavy AI exposure have room to move higher from their already-elevated 2023 price levels, they’ll need more news like AMD’s higher growth projections for the artificial intelligence market, as the U.S. economy is expected to grow slower in 2024.