The semiconductor industry is trying to rebound after suffering through most of 2023. Sales have been rising on higher demand as inflation continues to ease. Also, the enthusiasm surrounding artificial intelligence (AI) is making semiconductors a hot market.

Global semiconductor sales totaled $47.6 billion in January, jumping a solid 15.2% year over year from $41.3 billion, the Semiconductor Industry Association (SIA) said. Although the monthly figures declined unexpectedly, sales have increased over the past three quarters.

John Neuffer, SIA president and CEO, said, “The global semiconductor market started the new year strong, with worldwide sales increasing year-to-year by the largest percentage since May 2022.”

He also said, “Market growth is projected to continue over the remainder of the year, with annual sales forecast to increase by double-digits in 2024 compared to 2023.”

Semiconductor sales peaked during the pandemic as millions worked and learned from home, driving demand for communication devices. However, the industry started facing challenges owing to the supply chain crisis and rising costs.

The Federal Reserve adopted a strict monetary tightening policy and hiked interest rates by 525 basis points starting March 2022, which further weighed on the industry as demand dried up due to higher costs.

However, with inflation cooling, pricing pressure eased and demand rebounded, which saw semiconductor sales rising once again from the second half of 2023.

The semiconductor industry is poised to grow as demand from multiple industries remains high. The ongoing enthusiasm surrounding AI is expected to boost semiconductor sales in the near term.

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 23.6% and 33%, respectively. The annual expense ratio of 0.68% is lower than the category average of 1.23%. 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.

Fidelity Advisor Semiconductors Fund Class I (FELIX Quick QuoteFELIX - Free Report) fund seeks capital appreciation. FELIX invests primarily in common stocks. Fidelity Advisor Semiconductors Fund Class I normally invests at least 80% of assets in securities of companies principally engaged in the design, manufacture, or sale of electronic components; equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors. 

Fidelity Advisor Semiconductors Fund Class I fund has a track of positive total returns for over 10 years. Specifically, FELIX’s returns over the three and five-year benchmarks are 22.9% and 31.9%, respectively. The annual expense ratio of 0.74% is lower than the category average of 1.02%. FELIX has a Zacks Mutual Fund Rank #2.

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 at least 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 6.2% and 18.8%, respectively. The annual expense ratio of 0.80% is lower than the category average of 1.%. Janus Henderson Global Technology and Innovation Fund 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.

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