SMH, AI ETFs Rise on Nvidia Blackwell Hope
After logging one of the worst weeks for semiconductor stocks in 2024, AI ETFs started a new week with healthy gains as optimism about Nvidia returned, and investors felt a Trump presidency was less assured.
The largest AI exchange-traded fund with Nvidia as a top holding, the VanEck Semiconductor ETF (SMH), rose nearly 4% on the renewed optimism.
Excitement around Nvidia comes as its promising Blackwell architecture for generative AI returned to focus and President Biden’s exit from the November election neutralized former president Trump’s questioning U.S. support for Taiwan last week.
NVDA rose nearly 5% and TSM gained more than 2% in Monday trading.
AI ETFs and Nvidia’s Blackwell
The incredible rise of AI ETFs has largely been supported by the dominance of Nvidia stock, the top holding in many of these mega-cap tech funds. Nvidia’s gains have been driven by its ability to beat earnings forecasts. Nvidia's Blackwell release date is expected in late 2024 to early 2025, and excitement over the “new era” GPU architecture is expected by many analysts to be transformative for artificial intelligence.
Here's a breakdown of what Blackwell brings to the table:
Focus on Generative AI: Unlike previous Nvidia architectures geared toward diverse computing tasks, Blackwell is purpose-built for generative AI, a rapidly growing field focused on creating new content like text, images, or code.
Unmatched Performance: Nvidia says that Blackwell delivers 30 times better performance on large language models compared to its predecessor. This significant leap allows for more complex and powerful AI applications.
Increased Efficiency: The company says that Blackwell will have 25 times greater energy efficiency compared to the prior generation. This may translate to lower operational costs for businesses and reduced environmental impact.
Custom Manufacturing Process: Blackwell GPUs are built using a 4NP manufacturing process tailored by TSMC, a leading chip manufacturer. This customization should improve power and performance, the company says. Superchip Design: Blackwell GPUs use a "superchip" design featuring two interconnected dies. This essentially creates a single, powerful AI processing unit.
High Bandwidth Connectivity: The two dies within a Blackwell GPU are linked by a high-speed, 10 terabytes per second (TB/s) connection, enabling efficient data transfer and processing.
Investors are banking that the Blackwell architecture will represent a significant leap in AI processing capabilities that can improve different fields, including natural language processing, computer vision and robotic automation. How this affects price remains uncertain.