The semiconductor industry is emerging from the lows of early 2023 and staging a solid turnaround. Sales have been growing steadily over the past three quarters on surging demand and 2024 looks promising on a series of positive news.

Semiconductor sales totaled $48 billion in November 2023, up 5.3% year over year for the first time since August 2022, the Semiconductor Industry Association reported on Jan 9. Sales totaled $46.6 billion in October.

Sales in November were driven by robust demand from China. Notably, sales increased 7.6% year over year in China, 7.1% in the Asia-Pacific region, and 3.5% and 5.6%, respectively, in the Americas and Europe.

Semiconductor sales soared during the peak of the pandemic when millions worked remotely, boosting demand for communication devices. However, the supply-chain crisis created at that time started impacting semiconductor sales in the second half of 2022. 

While that problem eased, price pressures, owing to multi-decade high inflation, started taking a toll on sales as demand started slowing.

However, the Federal Reserve’s monetary tightening campaign that saw interest rates being raised by 525 basis points led to a sharp decline in inflation. Easing price pressures is once again seeing demand for semiconductors rebounding.

Semiconductor sales started rebounding in the second half of 2023, which is fast gathering pace. Global semiconductor sales are projected to jump 13.1% in 2024 to reach $588.4 billion, according to the World Semiconductor Trade Statistics.

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to semiconductor producers carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Semiconductors Portfolio (FSELX Quick QuoteFSELX - Free Report) fund seeks capital appreciation. FSELX normally invests at least 80% of assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards, and other components); equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Fidelity Select Semiconductors Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSELX’s returns over the three and five-year benchmarks are 23.4% and 34.8%, respectively. The annual expense ratio of 0.69% is lower than the category average of 1.05%. FSELX has a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.

Janus Henderson Global Technology and Innovation Fund (JNGTX Quick QuoteJNGTX - Free Report) aims for long-term growth of capital and specializes in technology. JNGTX invests the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.

Janus Henderson Global Technology and Innovation Fund has a track of positive total returns for over 10 years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 4.9% and 20.5%, respectively. The annual expense ratio of 0.91% is lower than the category average of 1.05%. JNGTX has a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.

DWS Science and Technology A (KTCAX Quick QuoteKTCAX - Free Report) fund seeks growth of capital. Under normal circumstances, KTCAX invests at least 80% of net assets in common stocks of U.S. companies in the technology sector.

DWS Science and Technology A fund has a track of positive total returns for over 10 years. Specifically, KTCAX’s returns over the three and five-year benchmarks are 6.9% and 17.3%, respectively. The annual expense ratio of 0.69% is lower than the category average of 1.05%. KTCAX sports a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

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