ETFs
Best performing stocks from the best ETF of the first half
VanEck Vectors Semiconductor ETF SMH, which targets the U.S. semiconductor sector, has surged 51.5% this year, becoming the best-performing ETF of the first half.
Although most stocks in SMH’s portfolio have generated strong returns this year, a few have gained more than 45%. These are NVIDIA Company NVDA, Semiconductor manufacturing in Taiwan TSM, Micron technology MU, Broadcom AVGO and Qualcomm incorporated QCOM.
Semiconductor stocks led the market rally, supported by artificial intelligence (AI) momentum. The expansion of AI applications promises to pave the way for new growth opportunities in the sector. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030 and continue to drive the market higher (read: Bet on the AI ecosphere with These ETFs).
NVIDIA, Apple (AAPL) and Microsoft (MSFT) are in a race to become the world’s most valuable company and have reached a market cap of $4 trillion thanks to growing enthusiasm for AI capabilities. NVIDIA has been at the forefront of integrating AI into its products and services (read: ETFs to tap as NVIDIA becomes the most valuable company).
Semiconductors have been the most important drivers of overall technology growth, given the use of chips in everyday life, from cars and electronic gadgets to airplanes and weapons. Demand will continue to increase, given increased digitalization in various areas such as healthcare, transportation, financial systems, defense, agriculture and retail. Rapid adoption of cutting-edge technologies such as cloud, Internet of Things, self-driving cars, gaming, wearables, VR headsets, drones, virtual reality devices, cryptocurrencies, 5G and other advanced information technologies are expected to continue to fuel growth. Additionally, the introduction of expensive next-generation chips has led to an improvement in the product line for semiconductors.
At its last meeting, the Fed forecast one rate cut this year and plans four cuts for 2025. The central bank changed the language of its statement, noting that there has been “modest further progress toward the goal inflation of 2% of the committee”. Previously, the statement had highlighted a “lack” of further progress. This heralds a period of higher interest rates for a while. Tech titans have shown strong resilience in the face of such a scenario. And when the Fed begins cutting rates later this year, these stocks will get a boost. Since the technology sector relies on borrowing to deliver higher growth, it is cheaper to borrow more money for new initiatives when interest rates are low.
Let’s take a closer look at the fundamentals of SMH.
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SMH in brief
The VanEck Vectors Semiconductor ETF provides exposure to companies involved in semiconductor production and equipment. SMH tracks the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. The VanEck Vectors Semiconductor ETF holds 26 stocks in its basket (read: 5 ETFs up over 30% in 1H).
VanEck Vectors Semiconductor ETF has managed assets worth $25.6 billion and charges 35 basis points in annual fees and expenses. SMH is heavily traded with volume of 7 million shares per day and has a Zacks ETF Rank #1 (Strong Buy) with a high risk outlook.
SMH Best Performing Stocks
Nvidia is the world leader in visual computing technologies and the inventor of graphics processing units. The stock has surged 155.6% this year. Its growth is estimated at 106.1% for the financial year (ending January 2025).
NVIDIA represents 24.9% of SMH’s assets and currently holds a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Taiwan Semiconductor is the world’s largest dedicated integrated circuit foundry. The stock has soared 67.3% this year and represents a 12.8% share of the ETF.
TSM has an estimated earnings growth of 18.3% for this year and has a Zacks Rank #2 (Buy).
Micron technology has established itself as one of the world’s leading providers of semiconductor memory solutions. The stock represents 4.5% of the assets of the SMH portfolio.
Micron Technology gained 63.5% and has an expected earnings growth rate of 120.9% for the fiscal year (ending August 2024). He has a Zacks Rank #2.
Broadcom is a leading global designer, developer and supplier of a wide range of semiconductor devices, with a focus on complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog products based on III-V. The stock has soared about 48.6% this year and represents an 8.4% share in the AVGO portfolio (read: Broadcom Jumps on Q2 Earnings: ETFs to Buy).
Broadcom has an estimated earnings growth rate of 12.2% for the fiscal year (ending October 2024) and a Zacks Rank #3 (Hold).
Qualcomm designs, manufactures and markets digital wireless telecommunications products and services based on code division multiple access technology. The stock is up 47% so far this year.
Qualcomm has an estimated earnings growth of 17.1% for the fiscal year (ending September 2024) and represents a 4.9% share in SMH. He has a Zacks Rank #3.
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QUALCOMM Incorporated (QCOM): Free Inventory Analysis Report
Micron Technology, Inc. (MU): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Broadcom Inc. (AVGO): Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports