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The Semiconductor Sector Should Continue to Rise

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
  • Semiconductor industry overview
  • Semiconductor industry growth outlook
  • How to invest in semiconductors

What is a semiconductor

Semiconductors serve as essential technology enablers, empowering many of the cutting-edge digital devices. Semiconductors play a vital role in a number of downstream industries and are the cornerstone of the global technology infrastructure.

Semiconductors are often overlooked but are the silent champion of the technology world. These are manufactured parts that power and connect various devices, ranging from smartphones to cars.

Semiconductor industry expansion

The semiconductor sector is undergoing a rapid expansion, propelled by the increasing integration of semiconductors into modern technologies. This industry advancements are directly impacting the evolution of various technologies.

The semiconductor industry is projected to experience substantial growth in the years ahead due to increasing demand across number of sectors such as consumer electronics, telecom, automobile, and healthcare. Additionally, the sector is poised to address the rising demand for specialised chips in emerging technologies like artificial intelligence (AI), the Internet of Things (IoT), and 5G networks.

This growth is fuelled by fierce competition among major industry players and consistent investment in research and development (R&D). Consequently, vendors are constantly compelled to innovate, striving to gain a competitive edge in the market.

Following a challenging year in 2023, semiconductor sales are expected to rebound in 2024, driven by renewed market demand and government incentives on a global scale. Projections indicate that global chip sales will reach $588 billion this year, marking a 13% improvement in comparison to 2023 and 2.5% increase compared to the record industry revenue of $574 billion in 2022.

Regarding end markets, both PC and smartphone sales are forecasted to rise 4% in 2024, rebounding from declines of 14% and 3.5% respectively, witnessed in the prior year.

Demand for semiconductor devices is expected to rise

The market demand for semiconductor devices is poised for strong growth, driven by the widespread adoption of electrification and autonomy within businesses. Electric vehicles (EVs) are at the forefront of this movement toward a sustainable future, with electronics and semiconductors playing pivotal roles as fundamental components.

Governments worldwide are establishing ambitious targets for the electrification of their transportation sectors. In response, leading automakers are making significant investments in R&D focused on electric vehicles.

Exposure to the semiconductor sector

The semiconductor industry is experiencing huge popularity among investors, as chips play a crucial role in contemporary technology. Investors have been supporting the semiconductor sector over the years with various investment avenues available. These range from broad index funds covering semiconductor companies to individual companies in the sector.

Recent substantial cash inflows into the world’s largest semiconductor Exchange-Traded Funds (ETF) shows significant confidence in the sector’s resilience, dismissing concerns of a looming tech bubble burst.

The VanEck Semiconductor ETF stands out as one of the most popular options for investors seeking exposure to the industry. This ETF tracks the performance of the MVIS US Listed Semiconductor 25 Index, comprising of the 25 largest and most liquid U.S.-listed companies within the semiconductor sector.

A graph of a stock market

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Source: TradingView

VanEck Semiconductor ETF technical analysis

After bottoming at $83.49 in October 2022 the VanEck Semiconductor ETF has rallied strongly posting a fresh record high of $239.14 in early March 2024. The index has risen more than 26% YTD and was up 73% in 2023.

After such uninterrupted run a pull back to unwind the overbought and diverging momentum conditions is likely to unfold in the short-term. The weekly Relative Strength Index (RSI) is firmly in the bull market range suggesting that the current weakness might just be a correction within the overall primary up trend and that higher price levels are feasible over the long-term.

Conclusion

We are witnessing unprecedented technological advancements, where semiconductor chips stand at the forefront of this progress and are likely to remain the key drivers of innovation in the foreseeable future.

The technology trends of artificial intelligence, augmented reality, quantum computing, self-driving cars and etc. owes much to the continual advancements in semiconductor technology. The future of technology relies on semiconductors and the industry appears set for a decade of growth.

Professional traders looking for magnified exposure to the semiconductor industry may consider Leverage Shares +3x Long Semiconductors or Leverage Shares -3x Short Semiconductors ETPs, which track the performance of the VanEck Semiconductor ETF.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Sandeep Rao

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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

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Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

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Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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