Are Investors Betting on Semiconductor ETF Rally?

The semiconductor industry was a drag on the broader technology sector and the related exchange traded funds earlier this year, but that trend is reversing, lifting ETFs such as the VanEck Vectors Semiconductor ETF (NYSEArca: SMH).

Earlier this month, semiconductor stocks and ETFs surged after Applied Materials, the world’s largest supplier of tools used to make semiconductor chips, said it earned $0.34 per share on revenue of $2.45 billion, beating The Street by $0.02 per share and expectations of $2.43 billion in revenue, the Wall Street Pit reports.

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The improving sentiment may foreshadow strength ahead for the overall chip industry as Applied Materials is considered an industry bellwether and the company’s results are viewed as an indicator of health for the industry.


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.

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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).