Apple Inc. (NASDAQ: AAPL), the largest U.S. company by market value, held one of its most widely anticipated events in recent memory this week with some analysts forecasting some benefit for select semiconductor stocks. That theme could boost some dedicated chip exchange traded funds.
On Tuesday, Apple unveiled the widely anticipated iPhone X model, iPhone 8 models and other products.
“As we have discussed in prior research, we expect Broadcom to benefit from increased dollar content in the forthcoming iPhone models, including the new OLED version that we expect to use Broadcom’s touch control technology,” wrote JPMorgan analyst Harlan Sur, reports CNBC.
Semiconductor exchange traded funds, such as the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX), have been impressive performers this year as the technology sector is the best-performing group in the U.S.
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, but SMH and SOXX are more direct plays.
“The relationship between Apple and Broadcom has been hot lately, generating much attention from Wall Street analysts in the run-up to what is expected to be a major upgrade for the iPhone. Sur previously noted that the wireless charging partnership between Apple and Broadcom — ‘a key enabler of Apple’s best-in-class performance’— has been going on for about two years,” according to CNBC.
Still, investors could be paying up for future catalysts for semiconductor and broader technology names. If there is a silver lining for the rising valuations on chip stocks it is that some industry observers believe the group’s valuations should not be measured in the traditional sense because of the evolution of the semiconductor business.
“Apple enters an iPhone announcement with momentum even before the release of its new products. The new X iPhone, supposedly the biggest upgrade in a decade and reported to cost $1,000, is also expected to be in short supply initially,” adds CNBC.
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Tom Lydon’s clients own shares of Apple.