China's ambitious goal towards self-sufficiency is flowing over into the semiconductor sector. The second largest economy is looking to divest itself from reliance in technology, heating up competition from the U.S., all to the benefit of semiconductor ETFs.
Per a Bloomberg article, "as the U.S.-China confrontation takes root, the ability to craft chips for everything from artificial intelligence and data centers to autonomous cars and smartphones has become an issue of national security, injecting government into business decisions over where to manufacture chips and to whom to sell them. Those tensions could kick into overdrive as Communist Party leaders set a five-year plan that includes developing China’s domestic technology industry, notably its chip capabilities."
“We’re in a new world where governments are more concerned about the security of their digital infrastructure and the resiliency of their supply chains,” said Jimmy Goodrich, vice president of global policy with the Washington-based Semiconductor Industry Association. “The techno-nationalist trends gaining traction in multiple capitals around the world are a challenge to the semiconductor industry.”
Traders looking to play semiconductors can take advantage of the Direxion Daily Semiconductor Bull 3X ETF (NYSEArca: SOXL).
For ETF investors not looking for leverage, here are three ETFs to watch:
- VanEck Vectors Semiconductor ETF (NYSEArca: SMH): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Semiconductor 25 Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The index includes common stocks and depositary receipts of U.S. exchange-listed companies in the semiconductor industry. Such companies may include medium-capitalization companies and foreign companies that are listed on a U.S. exchange.
- iShares PHLX Semiconductor ETF (NasdaqGM: SOXX): seeks to track the investment results of the PHLX Semiconductor Sector Index composed of U.S. equities in the semiconductor sector. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index measures the performance of U.S.-traded securities of companies engaged in the semiconductor business.
- SPDR S&P Semiconductor ETF (NYSEArca: XSD): seeks to provide investment results that correspond generally to the total return performance of an index derived from the semiconductor segment of a U.S. total market composite index. In seeking to track the performance of the S&P Semiconductor Select Industry Index (the “index”), the fund employs a sampling strategy. The index represents the semiconductors segment of the S&P Total Market Index (“S&P TMI”).
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