What do Apple, Microsoft and Tesla all have in common? Semiconductor chips are a key component in their products, and they’re all worried they won’t have enough.
What’s the big deal? Companies supplying the world’s computer chips are wrestling two big trends:
- Skyrocketing demand for chips caused by a surge in digital consumption during COVID (i.e. computers, video games etc.) and growing demand for electric vehicles.
- Pandemic-related supply chain troubles created long wait times for various industries — which is expected to drag on until 2022.
For the rest of 2021, analysts are forecasting strong sales growth among semiconductor companies — with growth falling slightly in 2022 as the supply shortage eases.
High pressure, higher performance: The increased focus on semiconductor manufacturers translated into impressive earnings:
- AMD (NASDAQ:AMD) is up 21% since reporting big earnings last week.
- Nvidia’s (NASDAQ:NVDA) stock is up 51% in 2021 and is expected to report earnings on Aug 18.
- ON Semiconductor (NASDAQ:ON) jumped 11% after reporting earnings this week.
The ETF Way: The iShares Semiconductor ETF (NASDAQ:SOXX) invests in some of the largest US-listed semiconductor companies:
- 5-year return: 341.7% (YTD Return: 22.7%).
- Top 3 holdings: Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), Intel (NASDAQ:INTC).
- Other facts: Focus on US-listed companies, ETF holds 30 companies.
