The chip industry is buzzing hot this year with the PHLX Semiconductor index gaining about 27% and hitting an all-time high. Most of the gains came from strong optimism over the deal between the two largest countries to end a year-long trade war that badly shook the industry last year. This is because chipmakers have lot of exposure in China (read: Will Semiconductor ETFs' Best Start to a Year Last Long?).
Though global semiconductor sales were off to a weak start in 2019 with a broad-based year-over-year decline in both January and February, it is expected to improve in the coming months on a trade pact. Rising demand for cutting-edge technology, including cloud computing, big data, Internet of Things, wearables, gaming, autonomous cars, VR headsets, drones, virtual reality, artificial intelligence and machine is fueling growth.
Additionally, the deployment of 5G (fifth-generation) technology — the next wireless revolution — is creating further opportunities. The wave of mergers and acquisitions provides further impetus to the space (read: Bet on NVIDIA's Largest-Ever Deal With These ETFs).
Chipmakers power much of the world’s technology with their new innovation and set the stage for digitalization in various corners like healthcare, transport, financial systems, defense, agriculture, retail and many others.
In order to tap the growing trend, investors should bet on ETFs & stocks in this industry. In fact, most of the products are skyrocketing, touching new highs this week, and have a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold). We have highlighted some of them below:
SPDR S&P Semiconductor ETF XSD
This fund tracks the S&P Semiconductor Select Industry Index, holding 35 stocks in its portfolio. It is widely spread across a number of securities, with none holding more than 4.05% share. The fund has AUM of $329.4 million and charges 35 bps in fees per year. It has surged 29.5% so far this year and carries a Zacks ETF Rank #3 (read: Tech ETFs Soaring to All-Time Highs).
VanEck Vectors Semiconductor ETF SMH
This fund provides exposure to 25 securities by tracking the MVIS US Listed Semiconductor 25 Index. It is concentrated on the top firm with double-digit exposure. The product has managed assets worth $874.6 million and charges 35 bps in annual fees and expenses. It has gained 29.2% in the year-to-date timeframe and carries a Zacks ETF Rank #2 (read: Semiconductor ETF Hits New 52-Week High).
iShares PHLX Semiconductor ETF SOXX
This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms with each accounting for less than 9.03% share. It has amassed $1.3 billion in its asset base and charges 47 bps in fees a year. The fund has gained 28.6% this year so far and has a Zacks ETF Rank #3.
Xilinx Inc. XLNX
It is a leading provider of All Programmable FPGAs, SoCs, MPSoCs and 3D ICs. The stock has seen solid earnings estimate revision of 37 cents for the fiscal year (ending March 2020) over the past 90 days with an expected growth rate of 11.01%. It has surged 52.5% so far this year and has a Zacks Rank #2. It also has a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
It provides lighting-class light emitting diode (LED), lighting, and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, South Korea, Japan, Malaysia, Taiwan, and internationally. The stock has seen positive earnings estimate revision of 5 cents for the fiscal year (ending June 2019) over the past 90 days with an expected growth rate of 310.53%. Cree has a Zacks Rank #2 and a Momentum Score of A. It is up 46.6% in the year-to-date time period (read: 4 ETFs to Invest in Soaring Semiconductor Stocks).
Inphi Corporation IPHI
It operates as a provider of fabless high-speed analog semiconductor solutions for the communications and computing markets. Though the stock has seen negative earnings estimate revision of a penny for this year over the past 90 days, it has a solid estimated earnings growth rate of 88.37%. It has gained 41.5% this year so far. The stock has a Zacks Rank #3 and a Momentum Score of B.
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