Concerns Rise About A High-Flying Tech Industry

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) are surging this year.

Semiconductor stocks are proving to be important drivers of the technology sector’s year-to-date ascent. For example, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) are up an average of 18.7% this year.

Amid that bullishness, some semiconductor industry observers are concerned that the group could be poised to retreat, potentially weighing on the broader technology sector in the process.

Hedge fund manager Dan Niles, a former semiconductor analyst, “says there’s too much complacency among investors, especially when it comes to semiconductor stocks. If those stocks see a sell-off, it could drag down the rest of the market,” reports CNBC.

Semiconductor ETFs have recently been durable performers as semiconductor stocks are rebounding to steady the broader technology sector, but that does not mean the gains are over for this suddenly hot group. However, valuations are rising for chip stocks.