Semiconductor ETFs, such as the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX), are on a torrid pace this year. Both funds are higher by about 47% year-to-date.
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.
“Fueled by rising demand, record profits and an unprecedented number of mergers, the index of 30 semiconductor and related equipment manufacturers is up 48 percent this year and has doubled since the start of 2016,” reports Bloomberg. “The group gained 1.1 percent on Tuesday, enough to lift it above the March 2000 record, more than two years after the tech-heavy Nasdaq Composite Index topped its bubble-era peak.”
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.
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.