4 Mutual Funds To Tap The Boom In Semiconductor Space

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The stay-at-home trend has put semiconductors in a sweet spot since the pandemic hit, thanks to the perked-up demand for laptops, PCs, video games, smart phones, data centers and now smart cars. Despite headwinds faced due to trade restrictions, the uptick in demand for gaming chips, cloud computing, and data center business is sure to boost semiconductor companies in the United States.

Even with the gradual reopening in place, several trends that people were forced to adapt will be here for another decade or so. At-home entertainment options, especially streaming and gaming, are here to stay and drive chip makers. Per a Mordor Intelligence report, the global gaming market is set to see a CAGR of 10.5% from 2021 to 2026 and this will fuel demand for semiconductors.

Along with that, the automobile sector is evolving into a more electronic component-dependent market with major carmakers planning to convert fleets into electric vehicles. In fact, per IHS Markit’s predictions, auto sales are likely to pick up this year with global light vehicle sales estimated to increase 9% to 83.4 million in 2021.

The massive digitization across the healthcare, transport, financial systems, defense, agriculture, and retail sectors is a boon for the semiconductor industry. The International Data Corporation predicts that the global semiconductor market is expected to increase 7.7% to $476 billion in 2021, after rising 5.4% in 2020. Per a report by the Semiconductor Industry Association, the global semiconductor industry sales jumped 14.7% year over year to $39.6 billion in February 2021.

Additionally, several mergers and acquisitions activities have aided the sector in recent times and will continue to do so this year. So far this year, the iShares PHLX Semiconductor ETF (SOXX) has added 16.6% in comparison to the S&P 500 and the Nasdaq’s 9.9% and 7.5% addition, respectively.

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