Semiconductor exchange traded funds have exploded higher this week as M&A deals have helped fuel the leading sector’s gains.
Direxion Daily Semiconductor Bull 3X Shares (NYSEArca: SOXL), a 300% leveraged ETF, rose 7.5% on Wednesday, while HOLDRS Semiconductor (NYSEArca: SMH) added 2.3%. The sector funds are off to a great start this week.
The semiconductor sector rallied after Broadcom (NasdaqGS: BRCM) earlier this week said it would buy NetLogic (NasdaqGS: NETL) for $3.7 billion, a 57% premium, reports Nasdaq.com.
Broadcom’s acquisition signals its belief that there is value in memory chips and the area is poised for growth.
“NetLogic is a small but growing semiconductor company that designs high-performance processors used in a variety of networking devices to help efficiently move information packets throughout a network,” said Morningstar analyst Brian Colello in a Sept. 12 note. “As data traffic should grow at an exponential rate in the coming years, we think NetLogic will play a critical role as a chip supplier to bigger, faster, more secure networking devices. Furthermore, we think Broadcom’s pending acquisition of NetLogic Microsystems for $50 a share is a great deal for NetLogic’s shareholders.”
Intel Corp. (NasdaqGS: INTC) recently teamed up with Google (NasdaqGS: GOOG) in optimizing the Android operating system, reports Shara Tibken for The Wall Street Journal. Intel hopes to make inroads into the smartphone and tablet market, and through the new partnership, the two companies will try to make a more efficient and competitive android system.