Technology stocks continue to rip higher and are now on track to their best year in a decade, per WSJ. The sector has gained about 41% this year, making it the best performing sector, significantly ahead of the S&P 500’s gain of about 25%.

In fact, technology has driven the S&P 500’s gains too since the sector accounts for 23% of the index. Some areas within technology have done much better.  The semiconductor index is up almost 50%.

Top performing chip stocks include AMD (AMD Quick QuoteAMD - Free Report) --up 110%, Lam Research (LRCX Quick QuoteLRCX - Free Report) --up 95% and Applied Materials (AMAT Quick QuoteAMAT - Free Report) --up 75%, this year.

Trade optimism is the main reason behind these gains as chip stocks have a lot of exposure to China. They derive large portion of their revenue from China since it is the world’s biggest chip market and also have supply chains in the country.

Many newer growth areas have emerged for chipmakers, including autonomous cars, cloud computing, virtual reality, gaming, wearables and the Internet of Things (IoT). Growing adoption of 5G would also boost the demand for chips.

At the same time, chipmakers may remain volatile till the US and China finalize a comprehensive trade deal. Also, the Chinese government has been trying to promote the domestic chip industry and reduce reliance on foreign firms.

To learn more about the iShares PHLX Semiconductor ETF (SOXX Quick QuoteSOXX - Free Report) , VanEck Vectors Semiconductor ETF (SMH Quick QuoteSMH - Free Report) , SPDR S&P Semiconductor ETF (XSD Quick QuoteXSD - Free Report) and Invesco Dynamic Semiconductors Portfolio (PSI), please watch the short video above.

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