ETF Trends
ETF Trends

Semiconductor stocks and the related ETFs have been key contributors to the technology sector’s strength this year. For example, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) is up nearly 24% year-to-date.

Big-name diversified technology ETFs also feature semiconductor exposure. For instance, the Technology Select Sector SPDR Fund (NYSEArca: XLK) includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.

“Semiconductors (INTC) (TSM), especially related to computing, are the mainstay of modern technology. As technology continues to evolve and improve, semiconductors are increasingly in demand to help power innovative devices. According to the Semiconductor Industry Association, global sales of semiconductors were $33.6 billion in July 2017, a 24.0% rise YoY (year-over-year) and a sequential rise of 3.1%. Although all the key regions posted healthy rises in July, growth in North America was higher at 36.1% YoY and 5.4% sequentially,” according to Market Realist.

Taiwan Semiconductor and Intel are the two largest holdings in SMH. SMH holds 26 stocks and tracks the MVIS US Listed Semiconductor 25 Index (MVSMHTR), “which is intended to track the overall performance of companies involved in semiconductor production and equipment,” according to VanEck.

“Worldwide semiconductor revenue is forecast to total $401.4 billion in 2017, an increase of 16.8 percent from 2016,” according to Gartner, Inc. “This will be the first time semiconductor revenue has surpassed $400 billion. The market reached the $300 billion milestone seven years ago, in 2010, and surpassed $200 billion in 2000.”

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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.

“Another possible source of growth for semiconductors is the development of crypto currencies. Crypto currencies, which became popular in recent years, are mined using semiconductors, thus providing immense opportunities for future growth. According to Bloomberg, growth in the Ethereum market in 2Q17 boosted the shares of Nvidia (NVDA) and Advanced Micro Devices (AMD) substantially. The VanEck Vectors Semiconductor ETF (SMH) offers investors a vehicle to invest in this fast-growing industry,” reports Market Realist.

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