The iShares PHLX Semiconductor ETF (NasdaqGM: SOXX), one of the largest exchange traded funds tracking chip makers, is up about 15% year-to-date and residing near record highs. That marks another impressive run for one of the benchmark semiconductor funds.
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. Some data points indicate the bullishness can continue for chip stocks and the related ETFs.
“On March 10, 2000, at the height of the dotcom bubble, the PHLX Semiconductor Index (SOX) closed at an all-time high. It immediately crashed and was long unable to approach those highs,” according to ETF Daily News. “Finally, this past November, the SOX was able to claw its way back to its 2000 levels. Over the past 3 and a half months, the index has done what we would want to see it do prior to an attempted breakout above an 18-year old all-time high — it has consolidated. Presumably, this has allowed it to build up enough fuel for a durable breakout, once it was able to decisively top its highs from 2000.”
The iShares PHLX Semiconductor ETF tracks the PHLX SOX Semiconductor Sector Index. The $1.66 billion ETF holds 30 stocks. NVIDIA Corp. (NASDAQ: NVDA), Intel Corp. (NASDAQ: INTC) and Texas Instruments Inc. (NASDAQ: TXN) combine for about a quarter of the ETF’s weight.
“What’s the takeaway? Besides the cool symmetry of the 18-year gap between clear new highs (not to mention this is the 9-year anniversary date of the current bull market low in many areas of the market — that is some voodoo!), it is a reminder of the virtues of relative strength,” reports ETF Daily News.
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.
SOXX has a price-to-earnings ratio of 28.28 and a price-to-book ratio of 5.15.
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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.