The Market Vectors Semiconductor ETF (NYSEArca: SMH) and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX), which tracks the cap-weighted PHLX SOX Semiconductor Sector Index, are off an average of more than 13% year-to-date and some market observers see declines for the semiconductor space continuing.
Eddy Elfenbein of the Crossing Wall Street blog said chip stocks are facing pressure from faltering PC sales, a strong U.S. dollar and weak economies in Asia. Despite better-than-expected earnings reports from chipmakers such as NXP and Qorvo, Elfenbein said the outlook remains grim until those central conditions improve,” according to CNBC.
The semiconductor industry, though, faces some headwinds. Research firm Gartner anticipates that worldwide shipments of personal computers, tablets and smartphones rose only modestly last year, which could cause chip sales to decline.
Semiconductor weakness comes as investors have been departing technology stocks and exchange traded funds to start 2016. Slumping shares of Apple (NasdaqGS: AAPL) have been a drag on ETFs such as the Technology Select Sector SPDR (NYSEArca: XLK).
Investors have grown increasingly concerned over the company’s iPhone sales growth, especially with China experiencing an economic slowdown. ETF investors will also have to keep a close eye on AAPL as the company makes up double-digit weights in most broad tech-sector ETFs. Chip stocks also make up a healthy percentage of broader tech ETFs’ lineups.
Making matters worse for semiconductor stocks and ETFs is negative sentiment coming from the options markets where traders are betting on more declines for the group.
“Looking to the options market, Stacey Gilbert of Susquehanna said traders are continuing to bet on more pain for semiconductor companies,” reports CNBC. “Specifically, Gilbert said she’s seen at-the-money put buyers on shares of Texas Instruments and NVIDIA, which is more likely to indicate big traders placing outright bearish bets rather than merely hedging existing long positions.”
Market Vectors Semiconductor ETF
