ETF Trends
ETF Trends

The technology sector has been one of the best-performing segments of the U.S. equity market to start 2017 and semiconductor stocks have been important contributors to that theme.

The Technology Select Sector SPDR (NYSEArca: XLK), the largest technology exchange traded fund by assets, along with rival, traditional technology ETFs such as the Fidelity MSCI Information Technology Index ETF (NYSEArca: FTEC) and the Vanguard Information Technology ETF (NYSEArca: VGT) feature exposure to semiconductor stocks.

While the various sector-specific ETFs provide broad exposure to their targeted segments, investors should keep in mind that there are differences in the different ETF offerings.

For instance, the Select Sector SPDR line of ETFs have more focused or less diversified exposure since they take holdings from the smaller universe of S&P 500 companies. The Vanguard line may have the most diversity with higher number of components.The Fidelity ETFs, though, are the cheapest of the bunch, which may be more appealing to long-term investors.

More direct approaches to chip makers among ETFs include the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX). However, declining motherboard shipments could weight on chip stocks and the aforementioned ETFs.

“Despite Intel, AMD and Nvidia having all launched new processor or graphics chip products for the first quarter, motherboard players continue to suffer decreased shipments in the quarter and demand is also unlikely to pick up in the second, according to sources from the upstream supply chain,” reports DigiTimes.

Traders looking to make bearish bets on chip ETFs can consider the ProShares UltraShort Semiconductors (NYSEArca: SSG), which takes the -2x or -200% daily performance of the Dow Jones U.S. Semiconductors Index and the Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS), which provides a -3x or -300% performance of the PHLX Semiconductor Select Index.

“Because of weak graphics card demand especially from China, players have already started cutting prices for their GTX 1060 (starting US$249) and GTX 1070 (starting US$379) graphics card to stimulate demand,” reports DigiTimes.

For more news and strategy on the Technology market, visit our Technology category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.