Synthetic intelligence (AI) continues to be essentially the most transformative expertise of our period, with semiconductor corporations main the cost and powering groundbreaking developments. After a strong restoration in 2024 pushed by demand for logic and reminiscence chips, the worldwide semiconductor market is forecast to develop by 15% this yr, reaching a complete worth of $728 billion, with the Americas and Asia Pacific anticipated to guide the expansion.1 The enlargement of knowledge facilities continues to drive important progress, particularly for corporations specializing in AI and semiconductor improvements. World gross sales in June 2025 have been US$60 billion, representing a year-over-year enhance of 20%.2
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Supply: Semiconductor Business Affiliation. As of August 4, 2025.
As AI-driven monetization alternatives start to take form, hyperscaler capital spending stays on the rise regardless of mounting tariff and financial headwinds. World knowledge heart capex soared by 53% year-over-year in Q1 2025, marking the sixth straight quarter of double-digit annual enlargement.3 Microsoft, Amazon and Google reported that demand persistently exceeds out there infrastructure capability for AI workloads, with projections indicating that extra capability will proceed to develop all year long. Amazon is ready to take a position at the least US$20 billion in Pennsylvania4 and US$13 billion in Australia5 to develop its knowledge heart infrastructure for AI and cloud providers. Meta’s capital spending may enhance additional in 2026, as it’s constructing a number of multi-gigawatt knowledge heart clusters to gas its AI ambitions, with the primary facility slated to go dwell subsequent yr. The corporate has made AI central to its promoting technique and plans to allow manufacturers to completely design and goal campaigns utilizing AI instruments by the tip of subsequent yr. Primarily based on the consumer’s finances, these new instruments would generate your entire commercial, together with photographs, movies and textual content, and ship it to the focused viewers.6
Up to now, AI demand has primarily targeted on coaching workloads, notably for frontier fashions. Whereas main tech corporations proceed pouring sources into constructing ever-larger AI fashions, they’re additionally reallocating extra funding towards inference. Inference is the stage the place skilled AI fashions course of new knowledge to generate insights, make predictions or help decision-making. Whereas coaching a mannequin is basically a one-time expense, prompting a mannequin (inference) produces tokens, every of which carries a price. In the course of the Google I/O 2025 keynote, Alphabet CEO Sundar Pichai shared that the agency processed 480 trillion tokens throughout its merchandise and APIs in April 2025, 50 instances greater than the identical month a yr earlier.7 The fast surge in token quantity displays rising utilization and adoption of AI fashions, signaling a better want for computing energy and driving increased demand for chips.
The shift in funding towards inference has additionally gained momentum with the launch of latest reasoning fashions. Whereas conventional AI fashions reply swiftly and excel at sample recognition, they typically fail to know broader contexts and battle with complicated reasoning. Reasoning fashions are constructed to deconstruct complicated issues into smaller, manageable steps and resolve them by means of specific logical reasoning. They’re particularly skilled to indicate their work and comply with a extra structured thought course of, which leads to longer computation instances for person queries. These fashions demand considerably extra compute throughout inference to cause by means of intricate issues. This evolution from primary sample recognition to structured reasoning is pivotal to AI, unlocking its potential to sort out complicated real-world challenges successfully. As AI adoption quickly expands, demand for inference will correspondingly intensify.
AI brokers are positioned to revolutionize how organizations perform, delivering breakthroughs in productiveness and operational effectivity. They’re clever programs designed to execute duties independently by comprehending goals, formulating choices and taking actions to attain predetermined targets. Whereas people outline the specified outcomes, AI brokers autonomously choose optimum actions required to perform these targets. These brokers boast a broad spectrum of makes use of, from supporting tutorial analysis and streamlining on-line purchases to planning leisurely holidays. Customer support, gross sales and advertising, and IT and cybersecurity are the three enterprise capabilities the place AI brokers are most often deployed or deliberate for implementation within the subsequent six months.8 As enterprises progressively combine AI brokers throughout numerous operational purposes, demand for computational infrastructure is escalating dramatically.
Hyperscalers are more and more targeted on ASIC (application-specific built-in circuits) infrastructure to fulfill surging AI demand. ASICs are custom-built for particular workloads and might execute these duties much more effectively and at a considerably decrease value than high-performance GPUs. Though the preliminary funding to develop ASIC infrastructure is appreciable, the long-term value of working GenAI workloads on these chips is predicted to be decrease as soon as the upfront expense is absorbed. For instance, in April 2025, Google unveiled Ironwood, its seventh-generation Tensor Processing Unit (TPU), particularly designed for inference workloads.9 Whereas Google’s in-house TPUs have been as soon as restricted to inner use, the corporate is increasing exterior entry to drive quicker progress of its cloud enterprise. Marvell Expertise initiatives the {custom} computing gadget market will surge to US$55.4 billion by 2028, greater than eight instances its dimension in 2023.10
HBM represents a cutting-edge reminiscence expertise engineered to ship quicker knowledge entry whereas decreasing vitality consumption, which is vital for the efficiency of AI processing. HBM’s market share within the dynamic random entry reminiscence (DRAM) phase is forecast to leap from 18% in 2024 to greater than 50% by 2030.11 Beginning with the next-generation HBM4, the bottom die might be produced utilizing logic processes, enabling decrease energy consumption and customizable options tailor-made to consumer necessities. Pushed by escalating computational calls for from AI coaching and inference workloads, HBM’s market outlook stays sturdy. As the first HBM provider for Nvidia, holding a 62% share of worldwide HBM shipments in Q2 202512, SK Hynix initiatives the worldwide HBM market to develop by 30% yearly by means of 2030.13
Overlaying the 30 largest US-listed shares and ADRs of corporations primarily concerned within the design, distribution, manufacture and sale of semiconductors, Nasdaq’s PHLX Semiconductor™ Index (SOX) delivered a complete return of 96% over the previous three years, outperforming the NYSE Semiconductor Index by 12 proportion factors and virtually doubling the return of the S&P Semiconductors Choose Business Index.
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Supply: Nasdaq World Indexes, Bloomberg. As of July 31, 2025.
SOX is a modified market capitalization-weighted index, with the highest three constituents by market capitalization capped at 12%, 10% and eight%, respectively, and the remainder capped at 4% throughout quarterly rebalancing. For the complete index methodology, please go to our web site.
As of the tip of July 2025, the ten largest constituents accounted for 61.5% of the index weight. 79.8% of the index weight is within the Semiconductor Subsector, with the remainder within the Manufacturing Expertise Gear Subsector, in keeping with the Business Classification Benchmark (ICB) classification system.
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Supply: Nasdaq World Indexes, FactSet. As of July 31, 2025.
All seven largest holdings posted constructive whole returns over the previous 12 months. On common, the highest 10 corporations achieved a one-year whole return of 21%. Inside the identical {industry}, inventory performances different considerably. The distinction in one-year whole returns between the best- and worst-performing shares among the many high 10 constituents (Broadcom and NXP Semiconductors) was a staggering 102 proportion factors. This demonstrates the significance of diversification, even when investing in a single sector or theme.
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Supply: Nasdaq World Indexes, FactSet. As of July 31, 2025.
As the biggest constituent in SOX, Nvidia was the third-best performer amongst all constituents, gaining 52% over the previous 12 months. It turned the primary publicly traded firm in historical past to attain a US$4 trillion market valuation in July 2025, after becoming a member of the trillion-dollar membership in Might 2023.14 Nvidia’s technological edge stays pronounced, as Blackwell shipments speed up, pushed by hovering AI reasoning demand and realized economies of scale. Past AI, the corporate identifies robotics as its most substantial addressable progress alternative, with autonomous automobiles representing the primary main industrial deployment. The agency just lately unveiled new NVIDIA Omniverse libraries and NVIDIA Cosmos world basis fashions that empower builders to construct next-generation robots and autonomous automobiles by integrating AI reasoning with scalable, bodily correct simulations.15
Because the second-largest constituent in SOX, Broadcom emerged as the most effective performer amongst all index elements, producing a one-year whole return of 85% by means of July 2025. The corporate continues to dominate the AI ASIC and AI networking semiconductor markets. The chipmaker is engaged with the highest seven hyperscalers for {custom} silicon merchandise, together with accelerators for Google, Meta and ByteDance. Furthermore, Broadcom has important publicity to enterprise software program following its acquisition of VMware in 2023. Its infrastructure software program division posted a 76% working margin final quarter, up from 60% a yr in the past.16
Because the world’s largest contract semiconductor producer, TSMC ranks because the third-largest SOX constituent, delivering a 47% whole return over the trailing twelve months.17 With web income from its high-performance computing phase increasing to 60% from 52% a yr in the past, AI-driven demand stays the first progress catalyst for TSMC, whereas its market dominance supplies it with pricing energy. Superior chips with sizes 7nm or smaller accounted for 74% of the corporate’s whole wafer income in Q2 2025. Regardless of the US president’s latest announcement of tariffs on semiconductor imports, Taiwan confirmed that TSMC secured an exemption from the most recent levies given its substantial American manufacturing investments.18
Past the escalating demand for superior coaching capabilities to help more and more complicated AI mannequin architectures, AI inference has surfaced as a pivotal progress driver. The fast enhance in token quantity signifies increasing utilization and adoption of AI fashions. The proliferation of AI brokers is poised to remodel numerous industries and considerably enhance compute demand. This dynamic panorama highlights the pivotal position of the semiconductor sector in driving the following wave of AI innovation.
Nasdaq’s PHLX Semiconductor Index (SOX) delivered a complete return of 96% over the three years by means of July 2025. Funds monitoring SOX embody the Invesco PHLX Semiconductor ETF (Nasdaq: SOXQ), the Mirae Asset TIGER US PHLX Semiconductor Sector Nasdaq ETF (South Korea: 381180), the Cathay PHLX Semiconductor ETF (Taiwan: 00830), the World X Semiconductor ETF (Japan: 2243) and the Yurie PHLX Semiconductor Index Fund (South Korea: 7D01596). The Mirae Asset TIGER Synth-US PHLX Semiconductor Sector Leverage ETF (South Korea: 423920) tracks SOX with two instances leverage.
Written by David Tsoi, Head of Index Analysis, APAC
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