While semiconductors have been hit by slowed consumer spending, the market has benefitted from big tech firms like Google, Microsoft, and Amazon upping their capital expenditures in this sector.
Google parent Alphabet reported its Q2 capital expenditures growing 24% year-over-year to $6.9 billion. Microsoft’s capital spending grew by 19% YoY to $8.7 billion in the quarter that ended June 30. Meanwhile, Amazon incurred capital expenditures of about $60 billion in 2021, of which roughly 40% was made up of technology infrastructure supporting AWS and worldwide stores business.
“Big Tech CapEx is the true leading indicator for AI semiconductor companies,” wrote Beth Kindig for Forbes. “Despite an enormous increase in Big Tech CapEx primarily driven by data centers, this line item does not get the attention it deserves in terms of follow-through to the semiconductor industry.
The Artificial Intelligence chip market is expected to grow from $8 billion in 2020 to $195 billion by the year 2030, according to Allied Market Research. This represents a compound annual growth rate of 37% from 2021 to 2030. A report by Dell’Oro Group estimates that the global data center CapEx will be $377 billion by 2026, suggesting that most of the growth noted by Allied Market Research will occur in the next few years.
“There is an ever-increasing demand for data center capacity, driven by rapidly growing cloud markets, aggressive expansion of hyper scale operator networks, and continued growth of data-rich digital services,” said Synergy Research Group Chief Analyst John Dinsdale.
Investors looking to buy into the growing semiconductor sector and other disruptive markets may want to consider the Neuberger Berman Disrupters ETF (NYSE Arca: NBDS). The actively managed NBDS seeks to invest in companies pursuing disruptive growth agendas that the team believes will shape the future and can invest globally across market capitalizations.
Rather than use traditional sector classification, the fund’s managers employ a disciplined process to seek innovative companies consistent with a longer-term investment horizon. The portfolio team uses machine learning, language processing, and cloud computing techniques to construct a targeted portfolio of roughly 30 companies.
NBDS is one of three actively managed ETFs that Neuberger Berman launched in April. The ETFs are an extension of the firm’s thematic equity investment capabilities using traditional fundamental equity research along with alternative data capabilities and consideration of material environmental, social, and governance factors.
Joseph Amato, chief investment officer and president of Neuberger Berman, said in a news release that the new ETFs “deliver Neuberger Berman’s thematic equity expertise to a broad investor base.”
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