Why the iShares Semiconductor ETF Rallied 12% in January

Shares of the iShares Semiconductor ETF (NASDAQ: SOXX) rallied 12% successful January, according to information from S&P Global Market Intelligence.

The SOXX provides diversified vulnerability to the semiconductor sector, with 30 names successful a modified weighting scheme, and nary banal exceeding 8% astatine the commencement of each rebalancing period. Moreover, this ETF excludes companies domiciled extracurricular the United States, specified arsenic assemblage heavyweights Taiwan Semiconductor (NYSE: TSM) and ASML Holdings (NASDAQ: ASML).

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And yet, it was apt the net results from TSMC and its capital-spending projections, on with skyrocketing representation prices, that drove this outperforming assemblage adjacent higher.

The archetypal 2 years of the artificial quality roar chiefly came from AI GPUs made by Nvidia (NASDAQ: NVDA). And portion it appears that GPUs are inactive successful abbreviated supply, sometime precocious past year, the representation and retention assemblage experienced its ain boom, on with accepted CPUs.

The determination apt has to bash with the AI buildout migrating from the grooming signifier to deploying much infrastructure for inference, which is fundamentally the usage of AI models successful mundane tasks. That appears to person reignited request for accepted DRAM, NAND flash, and hard disk drives for section storage, arsenic good arsenic for endeavor CPUs to deploy the models, orchestrate traffic, and alteration machines to speech to 1 another.

During the quarter, forecasts for some DRAM and NAND flash pricing skyrocketed. In fact, the terms of accepted DRAM is expected to summation by 90% to 95% compared with the anterior quarter, portion NAND flash is projected to surge by 55% to 60%, according to Trendforce.

Thus, it's nary wonderment that representation elephantine Micron (NASDAQ: MU), present the ETF's largest weighting, rallied 45.6% successful January.

But the request surge isn't conscionable happening with representation chips. It appears the monolithic AI capital-spending rhythm continues to assistance each boats. While TSMC isn't portion of the wide ETF, the institution reported blowout net and forecast monolithic superior spending of $52 cardinal to $56 cardinal successful 2026, up 40% from 2025.

The monolithic spending summation for TSMC, on with immense increases successful representation prices, caused semiconductor instrumentality companies to rally arsenic well.

The outsize gains from Micron and the semicaps were capable to offset alternatively middling January performances from the ample weightings of Nvidia (NASDAQ: NVDA), which roseate conscionable 2.5%, and Broadcom (NASDAQ: AVGO), which really declined 4.3% during the month.