The VanEck Vectors Semiconductor ETF (NASDAQ: SMH) notched a 30.44% gain in the second quarter as the industry’s notched its best quarterly showing in two decades. That could be a sign more bullishness is on the way for SMH and friends in the back half of the year.

SMH, one of the bellwether semiconductor ETFs, seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Semiconductor 25 Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The index includes common stocks and depositary receipts of U.S. exchange-listed companies in the semiconductor industry. Such companies may include medium-capitalization companies and foreign companies that are listed on a U.S. exchange.

“While semiconductor stocks were impacted by the supply-chain disruptions from the pandemic, they have shown resilience this year as Wall Street largely remained bullish on the adoption of 5G and the secular growth in the industry,” reports Yun Li for CNBC.

For its part, SMH just posted its best quarter since the final three months of 2001.

Banking on the Economy

As an industry, semiconductor makers are highly tied to global growth, estimates for which are being ratcheted lower due to the coronavirus. However, many of those trimmed estimates pertain to the first half of this year and if there is pent up demand seeping into the third and fourth quarters.

Stay-at-home trends could also bolster SMH and rival chip ETFs.

Nvidia was among the first stocks to make back all its coronavirus losses. With a solid performance in its gaming and data center businesses, Nvidia was well-positioned for a stay-at-home world amid the pandemic. The stock is more than 40% this (second) quarter,” according to CNBC.

Over the past decade, semiconductor companies have grown more efficient, reducing costs and increasing production. Chipmakers learned to streamline production and improve their capacity planning and equipment spending. Meanwhile, chip demand surged as the global economy expands.

Year-to-date, investors added nearly $461 million to SMH.

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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.