Semiconductor stocks have been outperforming the broader technology sector and the market over the past few weeks. The iShares Semiconductor ETF is up 24% over the past three months while the S&P 500 index is up about 7.5% during the same period. Below, we look at some of the factors driving this momentum and analyze the four Semiconductor ETFs available to investors who want low cost, diversified exposure to this high-growth industry.
Earnings reported by many major chip companies, including Intel (NASDAQ:INTC) (INTC), Qualcomm (NASDAQ:QCOM) (QCOM), Nvidia (NVDA) and Texas instruments (TXN), for the recent quarter were better than expected. Semiconductor industry is currently ranked 21 out of 265 Zacks Industries (top 8%), reflecting the recent earnings momentum.
There is a lot of consolidation going on in the industry that has struggled with rising costs, pricing pressures and increased completion from Asia. Last month, Japanese conglomerate Softbank (SFTBY) announced the acquisition of British chip designer ARM Holdings (LON:ARM) for $32 billion, which would be the largest-ever acquisition of a European tech company. Soon after that Analog Devices agreed to acquire the Linear Technology (NASDAQ:LLTC) for $14.8 billion. Last year, Avago Technologies had acquired Broadcom (NASDAQ:AVGO) (AVGO) for $37 billion.
While some of the traditional business areas face challenges, like PC sales are slowing down and smartphones sales are becoming flattish, newer growth areas have emerged for chipmakers, including Autonomous Cars, Cloud Computing, Gaming, Wearables and Internet of Things (IoT).
There is a lot of innovation going on in the industry; chipmakers are adopting new materials and technologies to manufacture smaller and more efficient chips.
| ETF | AUM | ER | 2 Y Return | # of Holdings | Index Methodology |
| SOXX | 440 M | 0.48% | 30% | 30 | Market Cap Weighted |
| SMH | 300 M | 0.35% | 35% | 26 | Market Cap Weighted |
| XSD | 226 M | 0.35% | 40% | 41 | Equal Weighted |
| PSI | 57 M | 0.63% | 41% | 30 | Smart Beta |
To learn more about iShares PHLX Semiconductor ETF (SOXX), VanEck Vectors Semiconductor ETF (SMH), SPDR S&P Semiconductor ETF (XSD) and PowerShares Dynamic Semiconductors ETF (PSI) please watch the short video below:
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ISHARS-PHLX SEM (SOXX): ETF Research Reports
VANECK-SEMICON (SMH): ETF Research Reports
PWRSH-DYN SEMI (PSI): ETF Research Reports
SPDR-SP SEMICON (XSD): ETF Research Reports
INTEL CORP (INTC): Free Stock Analysis Report
NVIDIA CORP (NASDAQ:NVDA
BROADCOM LTD (AVGO): Free Stock Analysis Report
QUALCOMM INC (QCOM): Free Stock Analysis Report
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