Shinhan Asset Management Launches SOL US AI Semiconductor Chip Maker ETF with Focused Investment in AMD

by Ryu Hyunseok

Published 16 Apr.2024 08:50(KST)

Shinhan Asset Management announced on the 16th that its semiconductor exchange-traded fund (ETF), ‘SOL US AI Semiconductor Chipmaker ETF,’ will be listed on the KOSPI market.

This product allows focused investment in chipmaker companies such as Nvidia and AMD, which design essential GPUs, NPUs, CPUs, and other components for AI-driven non-memory semiconductors.

The portfolio includes 10 stocks, such as Nvidia (27.8%), AMD (18.8%), Broadcom (16%), Intel (12.9%), and Qualcomm (6.9%).

Kim Jeong-hyun, head of the ETF Business Division at Shinhan Asset Management, said, “If non-memory semiconductors, which interpret, compute, and process data, are the core of AI semiconductors, then the hegemony of the non-memory semiconductor value chain is held by a few chipmaker companies that possess the fundamental technology of chip design. The SOL US AI Semiconductor Chipmaker ETF incorporates Nvidia and AMD at the highest weights among domestically listed overseas stock ETFs to enable focused investment in the core chipmakers of AI semiconductors.”

While the memory semiconductor market, characterized by a small number of products produced in large quantities, is centered around integrated semiconductor companies responsible for production, the non-memory semiconductor market, which features a large variety of products produced in small quantities, is growing through thorough division of labor within the value chain. Non-memory semiconductors are structured such that chipmaker companies like Nvidia, which design semiconductor chips, are at the top of the value chain, providing customized designs for production to design houses and outsourcing manufacturing and production to foundry companies. Collaboration with materials, components, and equipment companies occurs throughout this process.

Since chipmaker companies outsource production and focus solely on AI semiconductor design, they do not require massive capital investment in facilities, enabling them to maintain high profitability. They can also establish conditions to concentrate solely on development through continuous R&D activities. Nvidia, a representative chipmaker expected to have an operating profit margin of about 65% in 2024, significantly outperforms TSMC (about 42%) and ASML (about 31%), suggesting that as the AI semiconductor market expands, chipmakers’ performance can grow even more substantially.

The expansion of the anti-Nvidia alliance to curb Nvidia’s dominance is also positive news for chipmaker companies overall. This is the UXL consortium, a technology consortium organized by Intel, Samsung, Google, and Qualcomm to reduce dependence on Nvidia’s AI development software platform, CUDA.

Kim said, “AI platform companies such as Microsoft, Amazon, Google, and Meta, which are customers of AI semiconductors, inevitably consider both cost-effectiveness and efficiency to implement AI models. The competition between Nvidia, which offers high cost and high performance, and the cost-effective and efficient UXL consortium will accelerate. Due to the rapid expansion of AI demand, the market pie will increase sharply, and ultimately, chipmakers including AMD, Intel, and Qualcomm, along with Nvidia, are expected to benefit.”