Beyond Nvidia: Semiconductor Companies Making Waves Without The Hype
For ETF investors, the key point is not whether Nvidia dominates the narrative, but how a broader AI theme is actually assembled. A thematic fund can look diversified at first glance while still leaning heavily on one part of the supply chain. In this case, semiconductors are only one layer of the opportunity set; software, infrastructure, and related enablers matter too. That distinction helps explain why a theme-focused ETF may behave differently from a simple โown the leadersโ approach.
Index design matters because it determines what gets rewarded and what gets excluded. A rules-based AI or innovation index is not trying to forecast the next breakout stock; it is trying to map a business ecosystem. That can reduce reliance on any single mega-cap name, but it also means investors need to understand the screening logic, rebalance cadence, and whether the index is intentionally broad or still concentrated in a few high-capitalization holdings. In thematic ETFs, those construction choices often matter more than the label on the fund.
For long-term allocators, the main portfolio question is exposure, not excitement. Semiconductor demand tied to AI can be powerful, but it also brings valuation sensitivity, cyclicality, and rapid technology turnover. An investor using a thematic ETF should think about where it sits in the overall portfolio: as a satellite position, not a substitute for core equity exposure. The most useful role for a theme like this is disciplined participation in a multi-year shift, while accepting that the path may be uneven and concentrated.
A recent study on the top 10 most valuable brands in the world found Apple (AAPL, AAPL:CA) holding the number one position for the third consecutive year with a brand value exceeding $1 trillion.1 Google (GOOG, GOOGL), Microsoft (MSFT, MSFT:CA), Amazon ([[AMZN], AMZN:CA) and McDonaldโs (MCD) round out the top five. Interestingly, Nvidia features (NVDA, NVDA:CA) at number six, leaping 18 spots in a year and seeing its brand value rise by 178% – by far, the biggest increase among the top 10.
We see the full top 10, along with the percentage change in brand value from 2023, in figure 1.
Figure 1: Top 10 Global Companies by Brand Value
Source: Kantar, as of 2024.
How does a company making semiconductors, a technology few people truly understand, rank right next to the company that is practically the symbol of fast food worldwide? Given how swiftly Nvidia is rising in the rankings, will people who have McDonaldโs and say, โIโm lovinโ it,โ soon start saying, โIโm liking this, but Iโm loving Nvidia moreโ? Is the worldโs love for chips going to exceed its love for fries?
Nvidiaโs prominence among the most popular brands is arguably linked to its share price performance over the last couple of years, positioning it alongside the biggest companies in terms of market capitalizationโa purely financial measure, unlike the intangible brand value.
But Nvidia is not alone in its field. Just as there are competitors like KFC, Five Guys and Burger King in the fast food industry, other companies are making semiconductors. They too are making waves this year with spectacular stock market returns, even if they don’t quite match Nvidiaโs meteoric rise.
For example, if instead of looking at the 10 most valuable global brands, as shown in figure 1, we look at the 10 biggest year-over-year risers in brand value, we would see Advanced Micro Devices in the tenth spot. It increased its brand value 53% relative to 2023.1
Source: WisdomTree, as of 7/1/24. Holdings subject to change.
Source: Kantar, as of 2024.
How does a company making semiconductors, a technology few people truly understand, rank right next to the company that is practically the symbol of fast food worldwide? Given how swiftly Nvidia is rising in the rankings, will people who have McDonaldโs and say, โIโm lovinโ it,โ soon start saying, โIโm liking this, but Iโm loving Nvidia moreโ? Is the worldโs love for chips going to exceed its love for fries?
Nvidiaโs prominence among the most popular brands is arguably linked to its share price performance over the last couple of years, positioning it alongside the biggest companies in terms of market capitalizationโa purely financial measure, unlike the intangible brand value.
But Nvidia is not alone in its field. Just as there are competitors like KFC, Five Guys and Burger King in the fast food industry, other companies are making semiconductors. They too are making waves this year with spectacular stock market returns, even if they don’t quite match Nvidiaโs meteoric rise.
For example, if instead of looking at the 10 most valuable global brands, as shown in figure 1, we look at the 10 biggest year-over-year risers in brand value, we would see Advanced Micro Devices in the tenth spot. It increased its brand value 53% relative to 2023.1
Chasing Nvidia or Positioning in the Broader AI Megatrend? This Is the Questionโฆ
We recently wrote about the exchange-traded funds with the biggest exposure to Nvidia. The fact that Nvidia went from $1 trillion to $2 trillion and then $3 trillion in terms of market capitalization without much in the way of significant corrections has been, well, historic. While we do not know if or when trends will change, itโs clear that every investor has to consider whether they want to focus on strategies with large weights to Nvidia or if they believe this represents a greater risk and want to position differently. WisdomTree developed the WisdomTree Artificial Intelligence and Innovation Index in late 2021, which is tracked, before fees and expenses, by the WisdomTree Artificial Intelligence and Innovation Fund (WTAI). The strategy is not designed to chase the name with the strongest momentum, like Nvidia, nor is it designed to dramatically overweight the so-called Magnificent 7.2 The strategy instead considers four distinct groups of companies, each meant to represent a component of the broader AI ecosystem: The biggest overall exposure of these four groupings is in the semiconductors group. However, this is not about Nvidia – it is about the fact that from the second half of 2024, consumers and businesses are going to have the option to buy a swath of new devices that each can run AI software, directly. To put a number to it, alongside a device with which many are familiar, the Apple iPhone 15 is made up of close to 30 individual semiconductors.3 While one can see the Apple-designed chips that have been widely publicized, an iPhone does not have 100% Apple-designed chips. For example, it is also widely cited that Apple would prefer to do less business with Qualcomm (QCOM) but that it has not yet been able to design chips that would allow it to replace Qualcommโs offering.4 Figure 2 considers the top 20 holdings, as of July 1, 2024, of WTAI. About these holdings, we posed one simple question: Involved with Semiconductors? To simplify, we broke it down into three answers:- Yes: The company is either designing semiconductors, fabricating semiconductors, creating software that facilitates the design of semiconductors or building machines that facilitate the fabrication of semiconductors.
- Custom: The company has been cited as having a focus on designing its own chips. The Magnificent 7 included Nvidia, Apple, Microsoft, Alphabet, Amazon.com, Meta and Tesla. While Nvidia is in the business of designing chips, the other six companies all have significant efforts toward designing their own chips for their specific use cases. Designing chips is an expensive proposition, so it is not an accident that the worldโs largest companies with incredible capabilities to generate cash are also the ones embarking on these efforts. We note that Alphabetโs Tensor Processing Units (TPUs), made by Broadcom, have been in place for some time and have been quite successful,5 even if Appleโs M-series has generated a lot of focus more recently.
- No: The company is not focused on the semiconductor ecosystem. There was only one firm in the top 20 in this group – CrowdStrike. This is a cybersecurity firm that delivers its service as a subscription software package.
Source: WisdomTree, as of 7/1/24. Holdings subject to change.
Conclusion: Matching the Megatrend with a Time Horizon
We constantly remind ourselves that the worldโs awakening to generative AI was only with the release of ChatGPT in November 2022 – even if it feels like it has been around for a long time. That is not even two years of history as we write these words. Nvidia has done an incredible job to marry the opportunity with its capabilities, but we are only about 20 months into a multi-decade evolution that could dramatically impact our relationship with computers, software and data. The semiconductor space is far more diverse than the premium level AI-accelerator chips (like the Nvidia H100 and B100 GPUs), and we believe in diversification across the ecosystem as opposed to trying to guess which individual firm might be next in line to deliver Nvidia-like results. 1 โKantar BrandZ Most Valuable Global Brands 2024,โ Kantar, 2024. 2 The term โMagnificent 7โ was coined in 2023 for seven of the worldโs largest market capitalization companies, encompassing Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla. 3Source: https://www.linkedin.com/posts/rajeev-chandrasekhar-971203257_q-how-many-semiconductor-chips-go-into-a-activity-7120765549571129344-mayd 4 Source: https://www.bloomberg.com/news/articles/2023-11-16/apple-project-to-replace-modems-made-by-qualcomm-falls-further-behind-to-2026 5 Source: Original Postroducts/compute/introducing-trillium-6th-gen-tpus" rel="nofollow" shape="rect">Introducing Trillium, sixth-generation TPUs | Google Cloud Blog Important Risks Related to this Article There are risks associated with investing, including the possible loss of principal. The Fund invests in companies primarily involved in the investment theme of artificial intelligence (AI) and innovation. Companies engaged in AI typically face intense competition and potentially rapid product obsolescence. These companies are also heavily dependent on intellectual property rights and may be adversely affected by loss or impairment of those rights. Additionally, AI companies typically invest significant amounts of spending on research and development, and there is no guarantee that the products or services produced by these companies will be successful. Companies that are capitalizing on innovation and developing technologies to displace older technologies or create new markets may not be successful. The Fund invests in the securities included in, or representative of, its Index regardless of their investment merit and the Fund does not attempt to outperform its Index or take defensive positions in declining markets. The composition of the Index is governed by an Index Committee and the Index may not perform as intended. Please read the Fundโs prospectus for specific details regarding the Fundโs risk profile. Christopher Gannatti, CFA, Global Head of Research Christopher Gannatti began at WisdomTree as a Research Analyst in December 2010, working directly with Jeremy Schwartz, CFAยฎ, Director of Research. In January of 2014, he was promoted to Associate Director of Research where he was responsible to lead different groups of analysts and strategists within the broader Research team at WisdomTree. In February of 2018, Christopher was promoted to Head of Research, Europe, where he was based out of WisdomTree’s London office and was responsible for the full WisdomTree research effort within the European market, as well as supporting the UCITs platform globally. In November 2021, Christopher was promoted to Global Head of Research, now responsible for numerous communications on investment strategy globally, particularly in the thematic equity space. Christopher came to WisdomTree from Lord Abbett, where he worked for four and a half years as a Regional Consultant. He received his MBA in Quantitative Finance, Accounting, and Economics from NYU’s Stern School of Business in 2010, and he received his bachelor’s degree from Colgate University in Economics in 2006. Christopher is a holder of the Chartered Financial Analyst Designation. Mubeen Tahir, Asscociate Director, Research Mobeen is a member of WisdomTreeโs research team where he focuses on a wide range of asset classes to offer strategic and tactical insights to our clients on global markets and investment products. Before joining WisdomTree in December 2018, Mobeen worked at Willis Towers Watson as an investment consultant advising institutional clients as well as their in-house fund business on asset allocation and portfolio construction with his research focus being equity and multi-asset smart beta. Mobeen has a BSc (Hons) in Accounting and Financial Management from Loughborough University and an MSc in Accounting and Finance from the London School of Economics and Political Science. He is also a CFA Charterholder. Original PostEnjoyed this article? Sign up for our newsletter to receive regular insights and stay connected.