In anticipation of a soft landing in the US economy and supported by the fanatical pursuit of AI, global stock markets began a “boom” mode in the first quarter of this year, and the increase was nowhere more impressive than semiconductor ETFs.

The MSCI Global Stock Index has repeatedly reached new highs in March and has risen 7.7% so far this year, the biggest increase since 2019. The S&P 500 index had a cumulative increase of 10.16% in the first quarter, the strongest year-on-year gain since 2019. It has reached a closing high 22 times this year. The European Stoxx 600 Index climbed about 7%, rising for two consecutive quarters.

Under the wave of AI,$VanEck Semiconductor ETF (SMH.US)$The increase reached 28.5%, which is expected to be the biggest quarterly increase since the first quarter of 2023.$PHLX Semiconductor Index (.SOX.US)$The semiconductor industry ETF surged about 17.5% and 17.7% respectively in the first quarter.

It accounts for a quarter of the weight of Vaneck Semiconductor ETFs$NVIDIA (NVDA.US)$Leading the way in the first quarter. With advanced AI chips and CUDA, a powerful software platform, Nvidia's increase reached 82%, increasing its market value by more than 1 trillion US dollars;$Micron Technology (MU.US)$Thanks to a blowout in storage demand under the AI boom, it ranked second in terms of increase, rising nearly 40% so far this year; Vaneck Semiconductor ETF is the second largest holding stock$Taiwan Semiconductor (TSM.US)$It is also picking up momentum, rising more than 30% since the beginning of 2024.

Ken Mahoney, president of Mahoney Asset Management, believes that the demand for AI in the semiconductor industry shows no sign of slowing down, and the rise in semiconductor stocks will continue:

Everyone realizes that this isn't just a short boom for a few quarters; it could be a multi-year expansion until all companies get the hardware they want and the chips they need.

While AI gains led by Nvidia have propelled the industry into another profitable quarter, this is far from the only theme driving SMH's rise. Hendi Susanto, portfolio manager and technical analyst at Gabelli Funds, pointed out that market expectations for recovery in fields such as memory chips, PCs, and smartphones have also driven the rise in the semiconductor sector.

Global smartphone shipments are expected to rebound 3% in 2024 after more than two years of downturn, according to a report released by market research firm Counterpoint Research on Thursday. High-end smartphone shipments will increase by 17%, and the spread of artificial intelligence and foldable devices will trigger demand for switching devices.

In the first quarter of 2024, gains driven by technology stocks spread globally. European stocks and Japanese stocks all outperformed the US. The UK FTSE 100 Index, the German DAX Index, the French CAC 40 Index, and the Spanish Ibex 35 Index and Nikkei 225 all performed better than the S&P 500 Index.

Among the major markets, the increase in Chinese and Japanese stocks in the first quarter of this year was the most notable. Due to investors' optimism about their economic prospects, driven by rising chip-related stock prices, the Japan Eastern Stock Exchange Index rose more than 17.2%, continuously approaching a record high.

However, UBS strategist Andrew Garthwaite warned that the rapid rise in semiconductor industry stock prices is sending a warning signal that business models such as artificial intelligence may pose extreme valuation risks.

Meanwhile, despite the strong performance of the semiconductor industry as a whole, not all semiconductor companies are benefiting from AI-related trading and investment themes. Seven constituent stocks in the Vaneck Semiconductor ETF (SMH) are expected to lose money in the first quarter, and performance within the industry is divided.

Editor/Somer