Nvidia Back in Focus and AI Infrastructure Acceleration
June 06, 2025
Read Time 3 MIN
Each quarter, we break down the evolving world of semiconductors through the lens of Nvidia’s earnings and the broader AI investment landscape. This latest call came at a pivotal moment, with demand surging, CapEx accelerating, and the semiconductor ecosystem transforming faster than most expected.
Nvidia is “Back in the Game,” But It's Not Alone
While Nvidia remains the headline act, the semiconductor narrative is no longer a one-player story. After spending some time “on the bench,” Nvidia has returned to the spotlight, thanks to renewed demand, sovereign AI expansion, and robust margins on next-gen products. But the real story lies in the entire stack—from foundational GPU builders like Nvidia and Broadcom to the less visible but crucial chip designers in the fabless space.
What’s changed? For one, the pace. From model development to chip deployment, the speed of innovation and adoption, particularly across hyperscalers and enterprise infrastructure, has exceeded expectations. This confirms a core view we’ve held that diversified exposure, particularly through vehicles like the VanEck Semiconductor ETF (SMH) and the VanEck Fabless Semiconductor ETF (SMHX), is critical in capturing this sector’s momentum without betting on a single name.
1-Year Performance Snapshot: Nvidia Returns, but Broadcom Leads
Source: Morningstar, as of 6/2/2025 Past performance is no guarantee of future results. Index performance is not representative of fund performance. It is not possible to invest directly in an index. This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. Fund holdings will vary.
CapEx: Not a Bubble, But a Baseline
A key theme this quarter was capital expenditure—its scale, sustainability, and strategic importance. Nvidia’s call emphasized sovereign AI deals (notably in the Middle East), rising enterprise demand, and hyperscalers racing to future-proof infrastructure. CapEx tied to AI infrastructure isn’t showing signs of topping; if anything, forecasts may still be too conservative.
Why it matters: Token usage, a proxy for how heavily AI tools are being used, is doubling every six months. That translates directly to more compute, which requires more chips, more power efficiency, and more architectural innovation. In short, the rails are down, and the trains are speeding up.
CapEx Surge as Hyperscalers Ramp Spending into 2025
Source: Amazon, Microsoft, Alphabet, Meta as of 4/30/2025. *Past performance is no guarantee of future results. This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. Fund holdings will vary.
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Beyond General-Purpose Compute: The Rise of Custom Silicon
The architecture of AI is shifting. Specialized chips—ASICs from names like Broadcom, Google (TPUs), and Amazon (Tranium)—are no longer secondary players; they’re core to how hyperscalers are optimizing cost and performance. This has implications up and down the stack. Nvidia’s pivot toward more tailored inference solutions is part of this evolution.
Meanwhile, fabless semiconductor designers, often behind the scenes, are developing chips that improve bandwidth, reduce power consumption, and unlock efficiency across the AI workflow. These innovators may not be household names yet, but their impact on AI deployment is foundational. It’s why we see SMHX as a space with significant long-term potential—it captures the "brains" behind the operation, not just the brawn.
Final Thoughts: AI Is the Story and Semiconductors Are the Backbone
If there’s one takeaway from this quarter’s discussion, it’s this: AI adoption isn’t slowing. It’s broadening. From sovereign initiatives to data centers to consumer internet, the demand for compute is feeding a flywheel of innovation, and semiconductors are at its center. Whether it's the industry giants or the rising specialists, this ecosystem is dynamic, diversified, and far from peaking.
We’ll continue to monitor the landscape closely each quarter. For now, it’s clear: AI and semis are inextricably linked, and the runway ahead is long.
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Disclosures
Holdings will vary for the VanEck Semiconductor ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: SMH - VanEck Semiconductor ETF - Holdings.
Holdings will vary for the VanEck Fabless Semiconductor ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: SMHX - VanEck Fabless Semiconductor ETF - Holdings.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
“CapEx” – capital expenditure or capital expense, is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. Prior to using any AI tools, please consult your compliance and legal departments to assess and mitigate potential risks associated with its application in your specific regulatory environment.
Please note that any content generated by an Artificial Intelligence (AI) system has not been subject to a human review, and thus no assurance can be made as to its accuracy. Please exercise caution when using AI systems and verify the content produced through such systems wherever possible.
An investment in the VanEck Semiconductor ETF (SMH) and VanEck Fabless Semiconductor ETF (SMHX) may be subject to risks which include, among others, risks related to investing in the semiconductor industry, special risk considerations of investing in Taiwanese issuers, equity securities, small-, medium and large capitalization companies, foreign securities, emerging market issuers, foreign currency, depositary receipts, issuer-specific changes, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/ discount and liquidity of fund shares, non-diversified, and index-related concentration risks, all of which may adversely affect the Fund. Small, medium and large capitalization companies may be subject to elevated risks. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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Disclosures
Holdings will vary for the VanEck Semiconductor ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: SMH - VanEck Semiconductor ETF - Holdings.
Holdings will vary for the VanEck Fabless Semiconductor ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: SMHX - VanEck Fabless Semiconductor ETF - Holdings.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
“CapEx” – capital expenditure or capital expense, is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. Prior to using any AI tools, please consult your compliance and legal departments to assess and mitigate potential risks associated with its application in your specific regulatory environment.
Please note that any content generated by an Artificial Intelligence (AI) system has not been subject to a human review, and thus no assurance can be made as to its accuracy. Please exercise caution when using AI systems and verify the content produced through such systems wherever possible.
An investment in the VanEck Semiconductor ETF (SMH) and VanEck Fabless Semiconductor ETF (SMHX) may be subject to risks which include, among others, risks related to investing in the semiconductor industry, special risk considerations of investing in Taiwanese issuers, equity securities, small-, medium and large capitalization companies, foreign securities, emerging market issuers, foreign currency, depositary receipts, issuer-specific changes, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/ discount and liquidity of fund shares, non-diversified, and index-related concentration risks, all of which may adversely affect the Fund. Small, medium and large capitalization companies may be subject to elevated risks. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.