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The semiconductor space is witnessing growing demand with increasing digitization and heavy dependency on the Internet amid the coronavirus crisis. Notably, expanding automotive sales are also driving semiconductor demand on the rising utilization of chips in electronic components of vehicles.
Furthermore, soaring global sales of semiconductors look encouraging. Notably, per The Semiconductor Industry Association (SIA) data, global semiconductor industry sales were $41.8 billion in April 2021, up 21.7% on a year-over-year basis. Moreover, the number was up 1.9% on a month-over-month basis.
Robust demand for electric vehicles (EVs) and plug-in hybrids also deserve a mention here. Markedly, EVs require complex electronic systems composed of advanced semiconductors. Further, the ramped-up deployment of 5G technology — the next-generation wireless revolution — is likely to support growth.
Moving on, the coronavirus-induced work-from-home and web-based learning trends spurred demand for chips among the PC manufacturers and data-center operators. Data-center operators expanded their capacities to meet the surge in 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. Meanwhile, shortage of semiconductors is troubling several industries with carmakers and electronic goods manufacturers being hard hit.
In fact, the advisory firm Forrester projects the chip shortage to last through 2022 and into 2023, which is a concern. Also, a KPMG report anticipates the global automakers to lose revenues worth $100 billion in 2021 due to constrained semiconductor supplies.
However, an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the coronavirus pandemic-led economic slowdown.
Per the Centers for Disease Control and Prevention (CDC) data, more than half of the U.S. population is already administered at least one dose of COVID-19 vaccine as mentioned in a CNBC article. A CNN report also stated that 12 states touched President Joe Biden’s target to vaccinate 70% adults with a minimum single dose of coronavirus vaccine within Jul 4 as cited by the CDC. Moreover, the latest public health guidelines issued by the CDC relaxed restrictions like wearing masks at all indoor and public gatherings.
On a positive note, there are certain new economic data releases, which are pointing toward economic revival. Notably, the recently-released robust job and manufacturing data majorly bolstered market participants' sentiment.
Top-Performing Semiconductor ETFs YTD
It is worth noting here that strong adoption of gaming, wearables, drones and VR/AR devices is fuelling significant growth in the semiconductor arena. Moreover, the augmenting uptake of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brimming with opportunities in 2021. According to the SIA, microchip sales are expected to climb 8.4% this year on a year-over-year basis. The association also projects sales to surge as supply-chain disruption is likely to linger for over a year.
Considering this bullish backdrop for the semiconductors space, we highlight top-performing ETFs of 2021 belonging to the sector:
Direxion Daily Semiconductor Bull (SOXL - Free Report) — up 25.6% year to date
The fund seeks daily investment results, before fees and expenses, of 300% of the performance of the PHLX Semiconductor Sector Index. The product has an AUM of $4.50 billion and sees a moderate three-month trading volume of about 19.4 million shares, on average. The expense ratio is 0.99% (read: A Guide to 10 Most-Popular Leveraged ETFs).
The fund seeks daily investment results, before fees and expenses, that correspond to two times the daily performance of the Dow Jones U.S. Semiconductors Index. It has an AUM of $252 million and sees a moderate three-month trading volume of about 196,000 shares, on average. The expense ratio is 0.95%.
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket. The product has an AUM of $600.5 million and sees a moderate three-month trading volume of about 71,000 shares, on average. The expense ratio is 0.57% (read: Bet on These 5 Top-Ranked ETFs to Boost Portfolio Returns).
This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. The product managed assets worth $5.42 billion and charges 35 bps in annual fees and expenses. It trades with three-month average volume of 4.6 million shares (read: Nvidia Blockbuster Q1 Earnings Put These ETFs in Focus).
This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms. The fund amassed $6.52 billion in its asset base and trades in a three-month volume of 1.5 million shares, on average. It charges 46 bps in fees a year from investors.
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5 Top-Performing Semiconductor ETFs YTD
The semiconductor space is witnessing growing demand with increasing digitization and heavy dependency on the Internet amid the coronavirus crisis. Notably, expanding automotive sales are also driving semiconductor demand on the rising utilization of chips in electronic components of vehicles.
Furthermore, soaring global sales of semiconductors look encouraging. Notably, per The Semiconductor Industry Association (SIA) data, global semiconductor industry sales were $41.8 billion in April 2021, up 21.7% on a year-over-year basis. Moreover, the number was up 1.9% on a month-over-month basis.
Robust demand for electric vehicles (EVs) and plug-in hybrids also deserve a mention here. Markedly, EVs require complex electronic systems composed of advanced semiconductors. Further, the ramped-up deployment of 5G technology — the next-generation wireless revolution — is likely to support growth.
Moving on, the coronavirus-induced work-from-home and web-based learning trends spurred demand for chips among the PC manufacturers and data-center operators. Data-center operators expanded their capacities to meet the surge in 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. Meanwhile, shortage of semiconductors is troubling several industries with carmakers and electronic goods manufacturers being hard hit.
In fact, the advisory firm Forrester projects the chip shortage to last through 2022 and into 2023, which is a concern. Also, a KPMG report anticipates the global automakers to lose revenues worth $100 billion in 2021 due to constrained semiconductor supplies.
However, an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the coronavirus pandemic-led economic slowdown.
Per the Centers for Disease Control and Prevention (CDC) data, more than half of the U.S. population is already administered at least one dose of COVID-19 vaccine as mentioned in a CNBC article. A CNN report also stated that 12 states touched President Joe Biden’s target to vaccinate 70% adults with a minimum single dose of coronavirus vaccine within Jul 4 as cited by the CDC. Moreover, the latest public health guidelines issued by the CDC relaxed restrictions like wearing masks at all indoor and public gatherings.
On a positive note, there are certain new economic data releases, which are pointing toward economic revival. Notably, the recently-released robust job and manufacturing data majorly bolstered market participants' sentiment.
Top-Performing Semiconductor ETFs YTD
It is worth noting here that strong adoption of gaming, wearables, drones and VR/AR devices is fuelling significant growth in the semiconductor arena. Moreover, the augmenting uptake of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brimming with opportunities in 2021. According to the SIA, microchip sales are expected to climb 8.4% this year on a year-over-year basis. The association also projects sales to surge as supply-chain disruption is likely to linger for over a year.
Considering this bullish backdrop for the semiconductors space, we highlight top-performing ETFs of 2021 belonging to the sector:
Direxion Daily Semiconductor Bull (SOXL - Free Report) — up 25.6% year to date
The fund seeks daily investment results, before fees and expenses, of 300% of the performance of the PHLX Semiconductor Sector Index. The product has an AUM of $4.50 billion and sees a moderate three-month trading volume of about 19.4 million shares, on average. The expense ratio is 0.99% (read: A Guide to 10 Most-Popular Leveraged ETFs).
ProShares Ultra Semiconductors ETF (USD - Free Report) — up 23.6%
The fund seeks daily investment results, before fees and expenses, that correspond to two times the daily performance of the Dow Jones U.S. Semiconductors Index. It has an AUM of $252 million and sees a moderate three-month trading volume of about 196,000 shares, on average. The expense ratio is 0.95%.
Invesco Dynamic Semiconductors ETF (PSI - Free Report) — up 18.2%
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket. The product has an AUM of $600.5 million and sees a moderate three-month trading volume of about 71,000 shares, on average. The expense ratio is 0.57% (read: Bet on These 5 Top-Ranked ETFs to Boost Portfolio Returns).
VanEck Vectors Semiconductor ETF (SMH - Free Report) — up 14.7%
This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. The product managed assets worth $5.42 billion and charges 35 bps in annual fees and expenses. It trades with three-month average volume of 4.6 million shares (read: Nvidia Blockbuster Q1 Earnings Put These ETFs in Focus).
iShares PHLX Semiconductor ETF (SOXX - Free Report) — up 14.5%
This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms. The fund amassed $6.52 billion in its asset base and trades in a three-month volume of 1.5 million shares, on average. It charges 46 bps in fees a year from investors.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>