Semiconductor ETFs: Big Winners of the First Quarter

A rapidly growing market

After an 11.3% drop in 2023, the semiconductor market rebounded sharply in the first quarter, causing a rise in many stock values.

Semiconductors have become ubiquitous in electronic equipment, ranging from vehicles and appliances to computers. Moreover, the race for artificial intelligence (AI) has intensified needs: these components play a crucial role in technology that requires high-performance chips to process complex data.

At the beginning of the year, the Taiwan Semiconductor Manufacturing Company (TSMC), one of the world's leading manufacturers, announced that it anticipated a significant increase in demand just to meet AI needs. This statement reinforced growth forecasts for the industry: the firm Gartner envisions a 16.8% increase in its revenue for 2024.

The rise in demand also has significant implications for financial markets. In recent months, companies tied to the sector have recorded substantial increases in their stock values, and investment funds geared towards technology and innovation have seen their portfolios appreciate. Specialized ETFs have greatly benefited from this upward trend.

Annonce

Semiconductor-based ETFs: a double-digit growth

Among the top 10 ETFs for the first quarter, 4 are specialized in the semiconductor sector. Their increases range between +21.2% to +36.7%, while the average performance of funds in the technology stocks category shows 9.9%.

Amundi MSCI Semiconductors ESG Screened UCITS ETF (CHIP): +36.7%
According to MorningStar data, it's this Amundi fund that recorded the best performance in the ETF market across all sectors for the first quarter of 2024. The ETF focuses solely on stocks of companies specialized in semiconductors, while integrating environmental, social, and governance (ESG) criteria.

VanEck Semiconductor UCITS ETF (SMH): +25.5%
On the second step of the podium, VanEck's ETF follows a passive management strategy, replicating the MVIS US Listed Semiconductor 25 index, which includes the main companies in the sector.

HSBC NASDAQ Global Semiconductor UCITS ETF: +22.9%
The tracker ranks fifth despite its still small size (34 million euros). Also managed passively, it displays +22.9% for the quarter and above all +58.7% over a year, far above the average for technology stocks (+29.1%).

iShares MSCI Global Semiconductors UCITS ETF: +21.2%
BlackRock's ETF ranks ninth, with a performance of 21.2% in the 1st quarter and 53.7% over a rolling year. It follows the MSCI ACWI Semiconductors index, offering diversified exposure to global leaders in the semiconductor industry and including heavyweights in the industry such as Intel, Qualcomm and NVIDIA.

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Pervasive risks and an intensification of competition

If semiconductors are now indispensable, the Covid-19 crisis has highlighted the dependence of many industries on Asian manufacturers, prompting the relocation of production now considered strategic. Several countries, including the United States and members of the European Union, have launched initiatives to increase their local capacities. France, for instance, has announced an investment of 5.5 billion euros, while Germany and Italy are subsidizing local activities to the tune of 4 and 3 billion euros respectively.

Massive investments are being directed towards the construction of new factories and the development of advanced chip manufacturing technologies. However, the rising demand also leads to increased global competition for talent and especially the resources necessary for this industry, which inevitably raises geopolitical questions.

Thus, the strong performances of the first quarter should not overshadow the fact that investment remains risky and heavily linked to the international climate. The global raw materials market remains highly sensitive to inflation and tensions between states. In 2023, semiconductors, for example, felt the repercussions of the war in Ukraine, as the country is one of the main exporters of neon, a gas used in component manufacturing. Finally, the technology requires skilled labor, which is also becoming scarce.