How to Profit from NVIDIA's $20B Groq Deal Without Stock Risk

The AI semiconductor sector is poised for a transformative year in 2026, driven by NVIDIA's $20 billion acquisition of Groq, a leader in high-performance computing for AI inference. For investors seeking to capitalize on this megatrend without directly owning volatile individual stocks, exchange-traded funds (ETFs) offer a compelling alternative. Two top contenders-VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX)-present distinct strategies for accessing the AI supercycle. This analysis compares their performance, risk profiles, regulatory exposure, and diversification to help investors choose the optimal vehicle for their risk tolerance and market outlook.

Performance and Cost Efficiency

Over the past year, SMH has outperformed SOXX, delivering a 36.32% return as of Q4 2025 compared to SOXX's 28.31% according to ETF comparison data. This gap reflects SMH's heavier weighting in market leaders like NVIDIA, which accounted for 16.99% of its portfolio. However, SMH's expense ratio of 0.35% is marginally higher than SOXX's 0.34% according to ETF data, a small trade-off for its aggressive exposure to AI-driven growth.

Holdings and Concentration Risk

SMH's market-cap-weighted structure concentrates 65.5% of its assets in its top 10 holdings, with NVIDIA and TSMC dominating. This approach amplifies returns during bull markets but exposes investors to outsized losses if key holdings underperform. In contrast, SOXX employs a capped weighting system, limiting any single stock to 8% of the fund. While NVIDIA's 6.62% allocation in SOXX still provides meaningful exposure, the fund's broader inclusion of companies like AMD and Micron reduces concentration risk.

Volatility and Beta Exposure

Both ETFs exhibit high volatility, reflecting the semiconductor sector's sensitivity to macroeconomic shifts. SOXX's 20-day volatility of 37.07% exceeds SMH's 33.55% according to volatility metrics, while its annualized volatility of 38.25% versus SMH's 28.80% underscores its risk profile. Beta metrics further highlight this divergence: SMH's beta of 1.52 slightly outpaces SOXX's 1.51 according to market data, indicating marginally higher sensitivity to market swings. For investors prioritizing stability, SOXX's diversified structure offers a buffer against short-term turbulence.

Regulatory Risks and the Groq Deal

NVIDIA's Groq acquisition faces regulatory scrutiny, particularly in the U.S. and EU, where antitrust concerns could delay or block the deal. SMH's 16.99% NVIDIA weighting according to market analysis makes it more vulnerable to regulatory headwinds than SOXX, which caps NVIDIA's influence at 6.62% according to ETF data. A regulatory setback could disproportionately impact SMH, whereas SOXX's broader portfolio would mitigate losses by capturing gains from secondary AI infrastructure players like memory and networking firms according to market commentary.

Sector and Geographic Diversification

Both ETFs are heavily concentrated in the electronic technology sector (82.76% for SMH, 86.34% for SOXX) according to ETF data, but SMH allocates more to technology services (5.27% vs. SOXX's 1.88%) according to sector breakdown. Geographically, SMH's 82.71% U.S. exposure and 9.37% Taiwan allocation contrast with SOXX's 83.47% U.S. and 5.13% Taiwan according to geographic allocation. While SMH's regional focus aligns with the U.S.-Taiwan semiconductor supply chain, SOXX's slightly more global approach may appeal to investors seeking geographic balance.

Strategic Implications for 2026

For investors with a high-risk tolerance and a bullish view on NVIDIA's dominance in AI inference, SMH offers a direct, high-conviction bet. Its performance in 2025 demonstrates the potential for outsized returns in a sector driven by a few leaders. However, SOXX's capped structure and diversified holdings make it a more prudent choice for those wary of regulatory risks or seeking to hedge against volatility. By including a broader range of AI infrastructure players, SOXX captures the sector's growth while reducing overexposure to any single company.

Conclusion

The NVIDIA-Groq deal underscores the transformative potential of the AI semiconductor sector in 2026. While SMH's aggressive, market-cap-weighted strategy offers maximum upside, it comes with elevated concentration and regulatory risks. SOXX's balanced approach, by contrast, provides a safer, more diversified path to the AI supercycle. Investors must weigh their risk appetite and market views: SMH for bold growth, SOXX for tempered resilience. In a sector defined by rapid innovation and regulatory uncertainty, the right ETF choice could determine the difference between riding the AI wave or being swept aside by it.