The VanEck Vectors Semiconductor ETF (SMH ), one of the most widely followed semiconductor exchange traded funds (ETFs), is up 32% this year and some market observers believe more upside can be had with the high-flying chip group.
Over the course of market history, different industries have taken turns being important tells regarding broader market health. These days, some market observers believe semiconductor stocks and the related exchange traded funds are those tells.
Semiconductor have exhibited high sensitivity to the trade war because China is a strong driver for the chip-making sector, which includes several fast areas of growth including gaming and artificial intelligence. If the trade war is renewed, the barriers will raise costs for many of these multi-national companies.
“While the group struggled last week after softer-than-expected earnings reports from Xilinx and Intel — with Intel’s lowered 2019 forecast pushing the sector more than 1% lower on Friday — the two analysts don’t think the moves spell doom for the sector,” reports CNBC.
SMH ETF Details
The $889.4 million SMH holds 25 stocks. Intel Corp. (INTC) and Taiwan Semiconductor (TSM) combine for over 23% of the fund’s weight.
“China was a big cloud, and Qualcomm’s kissing and making up with Apple actually turned out to be Intel’s loss, so some of this is very idiosyncratic, ” said Chantico Global CEO Gina Sanchez in a CNBC interview. “It’s a really mixed bag, but there’s an expectation that these semis will recover in the second half or, if you listen to Texas Instruments, the first half of next year.”
Qualcomm is SMH’s sixth-largest holding at a weight of 5%. That stock surged a staggering 54% in April following a legal victory over Apple. On Tuesday, Bank of America/Merrill Lynch reiterated a Neutral rating on Qualcomm, but raised its price target on the chip giant to $90 from $71.
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