In this piece we will take a look at the top ten semiconductor ETFs to buy in 2022.
The semiconductor industry is the backbone of the technology sector as it is responsible for providing the equipment on which gadgets run. As a testament to its strength, there are several research reports out there that have blossoming estimates for the semiconductor industry, despite the market-wide downturns that have rattled investor confidence throughout the course of this year.
Starting with a report from Fortune Business Insights, the industry was estimated to be worth $452 billion in 2021. From this, the research firm expects the industry to grow at a compounded annual growth rate (CAGR) of 9.2% to have an estimated final value of $893 billion as 2029 comes to an end. The drivers of this growth are believed to be a growing share of consumer electronics devices as well as advanced technologies such as artificial intelligence and machine learning that enable corporations to revamp their operations and generate unique products and insights.
Another report from Design & Reuse takes a look at the overall semiconductor sales growth. It outlines that the CAGR for this metric was 25% last year and will stand at 11% this year. Additionally, and more importantly, it also states that if the CAGR does meet 11% in 2022, then it will be the first time that the semiconductor industry will grow in double digits for three consecutive years since 1993-1995.
Finally, renowned firm McKinsey has some of the most optimistic takes on the chip sector. It shares that the industry grew by 20% in 2021 and stood at $600 billion. Furthermore, McKinsey estimates that the sector will grow at an aggregate annual percentage ranging from 6% to 8% by 2030. This in turn will lead to a trillion dollar industry by the end of this decade, if price increases and balanced supply and demand remain in play.
Therefore, it is a no brainer that the semiconductor industry merits a serious look. Some of the top companies that are part of notable semiconductor ETFs include Taiwan Semiconductor Manufacturing Company (NYSE:TSM), Broadcom Inc. (NASDAQ:AVGO) and Advanced Micro Devices, Inc. (NASDAQ:AMD).
Photo by Slejven Djurakovic on Unsplash
Our Methodology
For researching this piece, we took a look at all the semiconductor ETFs out there and then analyzed them through several factors such as their net asset values, year to date returns, constituent companies, and issuing firms. These points have been provided with each of the funds shown in this piece.
Top 10 Semiconductor ETFs to Buy in 2022
10. ProShares UltraShort Semiconductors (NYSE:SSG)
ProShares UltraShort Semiconductors (NYSE:SSG) is what is commonly known as an ‘inverse’ fund. As this moniker suggests, these funds are designed to generate value for their investors when the stocks they are made up of are falling. While it sounds counterintuitive to include the ProShares UltraShort Semiconductors (NYSE:SSG) in our list, the current state of the chip sector, which has seen several large companies bleed market value, can result in bearish investors finding value from an ETF that is in an inverse of the market.
The largest constituent of the ProShares UltraShort Semiconductors (NYSE:SSG) is the Santa Clara, California chip designer NVIDIA Corporation (NASDAQ:NVDA). The company’s shares represent 27.65% of the fund’s $7.47 million in assets under management (AUM). NVIDIA is the world’s largest supplier of graphics processing units (GPUs) and the current bloodbath in the cryptocurrency sector has led to worries about its products generating strong interest from the consumer market.
Insider Monkey’s Q1 2022 survey of 912 hedge funds revealed that 102 had held a stake in NVIDIA Corporation (NASDAQ:NVDA). The firm’s largest investor in our database is Ken Fisher’s Fisher Asset Management which owns 7.3 million shares that are worth $1.9 billion.
9. KraneShares CICC China 5G & Semiconductor Index ETF (NYSE:KFVG)
As opposed to most other semiconductor ETFs out there which target the U.S. stock market, KraneShares CICC China 5G & Semiconductor Index ETF (NYSE:KFVG) is a fund that consists of companies that are operating in China. It tracks an index developed by the China International Capital Corporation and is a key ETF since China plans to vastly boost its local semiconductor manufacturing over the coming years, and the country has one of the strongest ecosystems of fifth generation (5G) infrastructure in the world. The Made in China 2025 initiative plans to source 70% of the country’s chip requirements from local companies, and it is expected that by the same year 40% of the global 5G user base will be in the East Asian country.
The largest holding of KraneShares CICC China 5G & Semiconductor Index ETF (NYSE:KFVG) is Luxshare Precision Industry Co Ltd which is best known for supplying products to the Cupertino, California consumer technology giant Apple, Inc. (NASDAQ:AAPL). These products include interconnect devices and other connectors. The fund also consists of Foxconn, which is the primary contract manufacturer for Apple, Inc. (NASDAQ:AAPL) and is responsible for the bulk of the global iPhone production.
8. Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ)
Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) is a semiconductor ETF that specifically targets companies that are listed on U.S. stock markets. It is based on the PHLX Semiconductor Sector Index (Index) and has total assets under management that are worth $48.7 million. The fund measures the performance of the 30 largest U.S. listed chip companies and it is reformed each year in September with rebalancing taking place at the end of each quarter.
PHLX Semiconductor Sector Index (Index)’s largest holding is in Texas Instruments Incorporated (NASDAQ:TXN), which is one of the oldest chip companies in America. The company is involved in selling chip products that let technology gadgets manage their power and covert signals from digital to analog.
Insider Monkey took a look at 912 hedge fund portfolios for this year’s second quarter to discover that 46 had bought a stake in Texas Instruments Incorporated (NASDAQ:TXN). Out of these, the largest belongs to Jean-Marie Eveillard’s First Eagle Investment Management which owns 3.3 million shares that are worth $621 million.
Other notable companies in the Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) are NVIDIA Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC), both of which are giants of the semiconductor world.
7. First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL)
First Trust Nasdaq Semiconductor ETF (NASDAQ:FTXL) is run by First Trust Portfolios L.P and it is designed to mirror the performance of the Nasdaq US Smart Semiconductor Index. It does this via copying the weightage of individual component companies of the NASDAQ Semi Index and seeks to generate returns that are 95% correlated with it. The fund has a total of $71 million in assets under management.
The fund also has a dividend per share of $0.0981 as of July 2022 and the largest chunk of shares in it are of Analog Devices, Inc. (NASDAQ:ADI). This company is headquartered in Wilmington, Massachusetts, United States and it provides products that engage in signals processing in a wide variety of computing applications. It sells to customers all over the globe and to several industries such as aerospace, industrials, automotive, communications, and consumer technology.
Out of the 912 hedge funds part of Insider Monkey’s portfolio survey for this year’s first quarter, 67 had owned Analog Devices, Inc. (NASDAQ:ADI)’s shares. The firm’s largest investor is John Armitage’s Egerton Capital Limited with a $615 million stake courtesy of 3.7 million shares.
6. ProShares Ultra Semiconductors (NYSE:USD)
ProShares Ultra Semiconductors (NYSE:USD) is another semiconductor ETF provided by ProShares. This fund seeks to double the daily returns offered by the Dow Jones Semiconductors Index tracking semiconductor firms listed in the United States. This also leads to the fund mirroring not only its parent index’s returns but also its losses. The fund is currently worth $146 million.
The ProShares Ultra Semiconductors (NYSE:USD) has a price to earnings (P/E) ratio of 32.65 and a dividend yield of 1.15%. Out of the 33 companies that it follows, the top three are NVIDIA Corporation (NASDAQ:NVDA), Intel Corporation (NASDAQ:INTC), and Broadcom Inc. (NASDAQ:AVGO). All three are key players in the semiconductor industry, and Intel and NVIDIA are leaders in their space.
Insider Monkey’s 912 hedge fund survey for Q1 2022 saw 76 funds having bought Intel Corporation (NASDAQ:INTC) shares. The company is currently in the midst of entering the contract chip manufacturing sector and introducing new manufacturing technologies to the market.
The ProShares Ultra Semiconductors (NYSE:USD) joins our list as one of the semiconductor ETFs that will give you a taste of top firms such as the Taiwan Semiconductor Manufacturing Company (NYSE:TSM), Broadcom Inc. (NASDAQ:AVGO), and Advanced Micro Devices, Inc. (NASDAQ:AMD).
5. Direxion Daily Semiconductor Bear 3X Shares (NYSE:SOXS)
The Direxion Daily Semiconductor Bear 3X Shares (NYSE:SOXS) is another ETF for the bearish investor. This fund allows to profit from a downturn in semiconductor prices. It seeks to amplify its daily tracked index performance by 3x, which then leaves space for hefty gains for the careful investor but also opens up room for hefty losses. The Direxion Daily Semiconductor Bear 3X Shares (NYSE:SOXS) consists of companies based in the U.S. and it has $311 million in assets under management.
As is the case with several other semiconductor ETFs, the Direxion Daily Semiconductor Bear 3X Shares (NYSE:SOXS)’s largest holdings also consist of NVIDIA Corporation (NASDAQ:NVDA). Apart from NVIDIA, however, the fund has 7% of its assets tied up in Advanced Micro Devices, Inc. (NASDAQ:AMD). AMD is one of the few companies in the world that is licensed to design and sell chips on the x86 microarchitecture. This results in higher barriers to entry to its markets and limits it to dealing with only one rival, namely the chip behemoth Intel Corporation (NASDAQ:INTC).
Insider Monkey scanned 912 hedge fund holdings for the first quarter of this year to discover that 83 had bought Advanced Micro Devices, Inc. (NASDAQ:AMD)’s shares. Out of these, Ken Fisher’s Fisher Asset Management is the firm’s largest shareholder with a $2.6 billion stake.
4. Invesco Dynamic Semiconductors ETF (NYSE:PSI)
The Invesco Dynamic Semiconductors ETF (NYSE:PSI) aims to invest 90% of its assets into the Dynamic Semiconductor Intellidex Index, which is a list of U.S. stocks that have been gauged through a proprietary calculation to have good capital appreciation. The ETF consists of 30 U.S. chip companies that have been evaluated through their earnings and price momentum, management strengths, and other metrics. It has a market value of $522 million as of July 2022.
The largest component firm of the Invesco Dynamic Semiconductors ETF (NYSE:PSI) is the San Diego, California semiconductor designer QUALCOMM Incorporated (NASDAQ:QCOM). QUALCOMM is the world’s largest supplier of smartphone processors, with its products powering the bulk of devices running Android. Additionally, the firm is also developing products for connected automobiles and the Internet of Things (IoT) devices.
Out of the 912 hedge funds part of Insider Monkey’s Q1 2022 survey, 73 had invested in QUALCOMM Incorporated (NASDAQ:QCOM). Panayotis Takis Sparaggis’s Alkeon Capital Management is the company’s largest shareholder with a $626 million stake courtesy of 4 million shares.
3. SPDR S&P Semiconductor ETF (NYSE:XSD)
The SPDR S&P Semiconductor ETF (NYSE:XSD) tracks the performance of the S&P Semiconductor Select Industry Index, which is a subsegment of the S&P Total Market Index that deals with the semiconductor industry. It is run by the State Street Global Advisors Funds Management Inc. The fund consists of 40 companies, has a market value of $42.5 million, a price to book (P/B) ratio of 3.17, and an estimated earnings per share (EPS) growth of 18.98%.
Out of its 40 constituent companies, the largest share of investment is in Impinj, Inc. (NASDAQ:PI) which is a specialized chip company. The firm provides devices such as miniature radios on chip that allow companies to track items in warehouses and supply chains, alongside providing retailers with the option of self checkout.
Impinj, Inc. (NASDAQ:PI) saw 22 investors out of the 912 hedge funds polled by Insider Monkey for this year’s first quarter. Its largest shareholder is Daniel Patrick Gibson’s Sylebra Capital Management. It owns 3.3 million shares that are worth $215 million.
2. iShares Semiconductor ETF (NASDAQ:SOXX)
iShares Semiconductor ETF (NASDAQ:SOXX) is a $6.4 billion ETF fund that was set up in 2001. It tracks the ICE Semiconductor Index (TR) and consists of 30 companies that operate in the U.S. The iShares Semiconductor ETF (NASDAQ:SOXX)’s 30 day SEC yield, which tracks its returns after management expenses have been accounted for, is 1.15% as of June 2022. Additionally, the fund has a price to book ratio of 4.46 and a price to earnings ratio of 18.67.
The largest holding of this semiconductor ETF is Broadcom Inc. (NASDAQ:AVGO), which is an American company that deals with selling communication products. Broadcom Inc. (NASDAQ:AVGO) accounts for 8.14% of the fund’s value, and the company is currently looking to expand from its core business to cloud computing by acquiring VMWare.
Insider Monkey’s Q1 2022 survey of 912 hedge funds revealed that 71 had held a stake in Broadcom Inc. (NASDAQ:AVGO). The firm’s largest investor is Ken Fisher’s Fisher Asset Management which owns 1.4 million shares that are worth $894 million.
1. VanEck Semiconductor ETF (NASDAQ:SMH)
VanEck Semiconductor ETF (NASDAQ:SMH) is managed by Van Eck Associates. It consists of 25 companies that provide it with an asset value of $6.2 billion. The fund tracks both American companies and foreign firms that have their shares traded on U.S. stock markets. It aims at tracking the performance of highly liquid firms and those that are the leading players in their market. The VanEck Semiconductor ETF (NASDAQ:SMH)’s 30 day SEC yield is 1%.
This ETF is also one of the few that has concentrated a big chunk of its holdings into the American depository receipts (ADRs) of the Taiwan Semiconductor Manufacturing Company (NYSE:TSM). This company is the world’s largest contract manufacturer of semiconductors and it is the sole supplier to Apple, Inc. (NASDAQ:AAPL) for the company’s processors. The Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is also racing to mass produce the 3-nanometer semiconductor manufacturing technology, which is the world’s most advanced chip manufacturing process according to some observers.
As the first quarter of 2022 came to an end, 81 of the 912 hedge funds tracked by Insider Monkey had held a stake in the Taiwanese chipmaker. Out of these, Ken Fisher’s Fisher Asset Management was the largest investor since it owned 26 million shares that are worth $2.7 billion.
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Disclosure. None. Top 10 Semiconductor ETFs to Buy in 2022 is originally published on Insider Monkey.
