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5 Top-Ranked Chip ETFs to Gain on Ongoing Supply Crisis
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The semiconductor market has continuously attracted investors’ attention as the space sees increasing demand from various sectors. The pandemic times accelerated demand within the space as the stay-at-home culture boosted demand for laptops, PCs and smartphones. Also, with the automobile sector becoming specifically advanced to include more electronic components in vehicles that rely on chips, semiconductor demand is rising.
The coronavirus-induced work-from-home and web-based learning trends spurred demand for chips from the PC manufacturers and data-center operators. Data-center operators increased their capacities to meet surging demand for cloud services. The companies that provide design and other components for chip making are expected to gain from this trend.
Per Technavio report, the data center market is projected to be valued at $519.34 billion during the 2021-2025 forecast period, witnessing a CAGR of 21% on the back of higher demand for cloud services and digitization.
The microchip supply crunch was previously impacting only the automobile industry but now smartphone and other electronic goods manufacturers are also bearing its brunt. In fact, the advisory firm Forrester projects the chip shortage to last through 2022 and into 2023, which is a concern.
The chip supply crisis is looking like the oil shortage of the 1970s, according to a barrons’ article. The delivery time increased to more than 20 weeks, per Susquehanna Financial Group data, as mentioned in the same article.
Semiconductor ETFs Poised to Gain
Per International Data Corporation (IDC) data, the global semiconductor industry sales are expected to increase 17.3% in 2021, indicating growth from a rise of 10.8% recorded in 2020. Overall, the semiconductor market is projected to be worth around $600 billion by 2025, witnessing a CAGR of 5.3% through the forecast period (according to the IDC report).
The IDC report further states that the chip market is seeing strength in the growing end markets like mobile phones, notebooks, servers, automotive, smart home, gaming, wearables and Wi-Fi access points
The revolutionary 5G platform is expected to act as a major catalyst for semiconductor revenues in the mobile phone market. The segment is expected to soar 128% with total mobile semiconductor revenues improving 28.5%. The X86 server chips are projected to deliver revenue growth of 24.6%. The notebook market sales are expected to be up 11.8% while game consoles, smart home and wearable semiconductors are likely to jump 34%, 20% and 21%, respectively. Automotive semiconductor revenues are projected to climb 22.8%.
The growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brewing with opportunities in 2021. Investors aiming to make the most of this uptrend in a diversified way could consider the following ETFs:
This ETF follows the ICE Semiconductor Index and offers exposure to 30 firms. The fund amassed $7.20 billion in its asset base. It charges 43 basis points (bps) in fees a year from investors. It flaunts a Zacks ETF Rank #1 (Strong Buy) with a High-risk outlook (read: 5 Top-Ranked ETFs Looking Good Following the September Slump).
This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. The product managed assets worth $5.99 billion and charges 35 bps in annual fees and expenses. The fund currently carries a Zacks ETF Rank #1 with a High-risk outlook (read: Play Sector 4 ETFs to Cash In On Upbeat U.S. Manufacturing Data).
This fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the Nasdaq US Smart Semiconductor Index. FTXL accumulated $82.9 million of AUM. The expense ratio is 0.60%. FTXL presently has a Zacks ETF Rank of 1.
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket. The product has an AUM of $680.1 million. The expense ratio is 0.56%. PSI sports a Zacks ETF Rank #1 at present with a High-risk outlook.
This fund tracks the S&P Semiconductor Select Industry Index. The fund has AUM of $1.10 billion. It charges 35 bps in fees per year. The product has a Zacks ETF Rank #1, presently, with a High-risk outlook (read: Buy the Dip in 5 Top-Ranked Tech ETFs).
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5 Top-Ranked Chip ETFs to Gain on Ongoing Supply Crisis
The semiconductor market has continuously attracted investors’ attention as the space sees increasing demand from various sectors. The pandemic times accelerated demand within the space as the stay-at-home culture boosted demand for laptops, PCs and smartphones. Also, with the automobile sector becoming specifically advanced to include more electronic components in vehicles that rely on chips, semiconductor demand is rising.
The coronavirus-induced work-from-home and web-based learning trends spurred demand for chips from the PC manufacturers and data-center operators. Data-center operators increased their capacities to meet surging demand for cloud services. The companies that provide design and other components for chip making are expected to gain from this trend.
Per Technavio report, the data center market is projected to be valued at $519.34 billion during the 2021-2025 forecast period, witnessing a CAGR of 21% on the back of higher demand for cloud services and digitization.
The microchip supply crunch was previously impacting only the automobile industry but now smartphone and other electronic goods manufacturers are also bearing its brunt. In fact, the advisory firm Forrester projects the chip shortage to last through 2022 and into 2023, which is a concern.
The chip supply crisis is looking like the oil shortage of the 1970s, according to a barrons’ article. The delivery time increased to more than 20 weeks, per Susquehanna Financial Group data, as mentioned in the same article.
Semiconductor ETFs Poised to Gain
Per International Data Corporation (IDC) data, the global semiconductor industry sales are expected to increase 17.3% in 2021, indicating growth from a rise of 10.8% recorded in 2020. Overall, the semiconductor market is projected to be worth around $600 billion by 2025, witnessing a CAGR of 5.3% through the forecast period (according to the IDC report).
The IDC report further states that the chip market is seeing strength in the growing end markets like mobile phones, notebooks, servers, automotive, smart home, gaming, wearables and Wi-Fi access points
The revolutionary 5G platform is expected to act as a major catalyst for semiconductor revenues in the mobile phone market. The segment is expected to soar 128% with total mobile semiconductor revenues improving 28.5%. The X86 server chips are projected to deliver revenue growth of 24.6%. The notebook market sales are expected to be up 11.8% while game consoles, smart home and wearable semiconductors are likely to jump 34%, 20% and 21%, respectively. Automotive semiconductor revenues are projected to climb 22.8%.
The growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brewing with opportunities in 2021. Investors aiming to make the most of this uptrend in a diversified way could consider the following ETFs:
iShares Semiconductor ETF (SOXX - Free Report)
This ETF follows the ICE Semiconductor Index and offers exposure to 30 firms. The fund amassed $7.20 billion in its asset base. It charges 43 basis points (bps) in fees a year from investors. It flaunts a Zacks ETF Rank #1 (Strong Buy) with a High-risk outlook (read: 5 Top-Ranked ETFs Looking Good Following the September Slump).
VanEck Semiconductor ETF (SMH - Free Report)
This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. The product managed assets worth $5.99 billion and charges 35 bps in annual fees and expenses. The fund currently carries a Zacks ETF Rank #1 with a High-risk outlook (read: Play Sector 4 ETFs to Cash In On Upbeat U.S. Manufacturing Data).
First Trust Nasdaq Semiconductor ETF (FTXL - Free Report)
This fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the Nasdaq US Smart Semiconductor Index. FTXL accumulated $82.9 million of AUM. The expense ratio is 0.60%. FTXL presently has a Zacks ETF Rank of 1.
Invesco Dynamic Semiconductors ETF (PSI - Free Report)
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket. The product has an AUM of $680.1 million. The expense ratio is 0.56%. PSI sports a Zacks ETF Rank #1 at present with a High-risk outlook.
SPDR S&P Semiconductor ETF (XSD - Free Report)
This fund tracks the S&P Semiconductor Select Industry Index. The fund has AUM of $1.10 billion. It charges 35 bps in fees per year. The product has a Zacks ETF Rank #1, presently, with a High-risk outlook (read: Buy the Dip in 5 Top-Ranked Tech ETFs).