Please try another search
The tech sector has been seen some steep ups and downs in September as profit-booking took centerstage last month. Though most segments under the broader technology seem to have shrugged off the selloff fears from late September, one corner that showed considerable resilience is semiconductors.
SPDR S&P Semiconductor (NYSE:XSD) ETF XSD is up 15.3% in the past month and 10.5% last week.This was in comparison with the tech-heavyNasdaq 100 ETF Invesco QQQ’s (QQQ) 5.8% monthly gain and 4.2% weekly gain. Broader tech ETF Technology Select Sector SPDR Fund’s XLK gains (one-month – 6.6%; one-week – 4.6%) also lagged the gains of the semiconductor ETFs.
Let’s take a look at the rally.
President Trump and his trade and tariff war with China and many other parts of the globe like Europe and Japan are known to all. Though the phase-one U.S.-Sino deal was signed in January, a full-fledged truce is yet to be seen.
Per Morgan Stanley (NYSE:MS) equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 52%” and are thus exposed to maximum risks if trade tensions spike. With a likely Biden presidency meaning no extreme U.S.-China trade tensions, the semiconductor space has every reason to soar higher.
The space is buzzing with mergers and acquisitions. Chip producer Xilinx (NASDAQ:XLNX) added 17% on Oct 9 on talks that Advanced Micro Devices (NASDAQ:AMD) AMD may buy the former for more than $30 billion. In September, the chip industry benefited from Nvidia’s acquisition news of Arm Limited for $40 billion. The Nvidia (NASDAQ:NVDA) deal was the biggest in the Semiconductor industry. As a result, the space soared massively last week (read: After A Record Q3, Can M&A Soar In Q4? ETFs In Focus).
Taiwan Semiconductor Manufacturing (TSM) recently reported better-than-expected sales for the month of September, accentuating prospects for an upbeat third-quarter earnings season for semiconductor stocks. Such upbeat sales data from the world's leading chip foundry raised hopes for the entire industry. Better-than-anticipated notebook PC and handset production is likely to act as a tailwind for the company itself and the industry.
Apart from TSMC’s gains, the semiconductor space is likely to benefit from Qualcomm’s QCOM growing business from emerging Chinese smartphone makers, Oppo, Vivo and Xiaomi (OTC:XIACF). 5G wireless upgrade cycle, including Apple's (NASDAQ:AAPL) upcoming iPhone 12 handsets, should prove beneficial for the company.
The coronavirus outbreak boosted demand for cloud computing manifold on rising remote activity.Stay-at-home trends have been aiding demand for gaming chips and data center business.The cloud is in fact the biggest market for AI chips as its implementation in data centers continues to increase as a means of enhancing efficiency and reducing operational cost, per Deloitte. The accelerating speed of digitization in various corners like healthcare, transport, financial systems, defense, agriculture and retail has been enhancing the future for semiconductors.
Semiconductor ETFs are still cheaper than the Nasdaq 100 ETF Invesco QQQ QQQ. The priciest semiconductor ETF iShares PHLX Semiconductor ETF SOXX is now trading at nearly 29.50 times P/E, while QQQ is trading at a P/E 30.85X. The least-pricey semiconductor ETF PSI trades at a P/E of 23.94X.
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Antero Midstream Corporation (NYSE:AM): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
QUALCOMM Incorporated (NASDAQ:QCOM): Free Stock Analysis Report
Technology Select Sector SPDR ETF (NYSE:XLK): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports
SPDR SP Semiconductor ETF (XSD): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Stocks fell sharply, with the S&P 500 leading the decline, finishing the day down almost 1.6% at 5,860. Meanwhile, the Nasdaq 100 dropped nearly 2.75%, closing at 20,550. This...
The stock market has hit a rough patch lately, with the benchmark SPDR S&P 500 (NYSE:SPY) sliding nearly 3% in a single week. Most sectors have followed the downward trend,...
Regimes are changing in the market, and this could mean a few things, but today, it means that volatility is back. Whenever these shifts come, specifically to the S&P 500...
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.