Chip Shortages: ETF Winners and Losers
Zacks Investment Research | Aug 27, 2021 01:00AM ET
The COVID-19 pandemic and the resultant work-learn-shop-from-home culture boosted the need for the already in-vogue digitization, accelerating the demand for various products and devices dependent on chips for their functioning. Demand for PCs, smart phones, gaming hardware and consoles increased.
Then there is demand rooting from the electric vehicle and telecom industry. The automotive sector has specifically advanced to include more electronic components in vehicles that rely on chips.
Robust recovery in smartphone sales is spurring demand for semiconductors. The global smartphone market make up about 35% of total smartphone sales.
No wonder, the industry is currently facing an acute shortage of chips. The chip crisis appears to be like the oil shortage of the 1970s, per a barrons’ article . The delivery time has increased to more than 20 weeks, per Susquehanna Financial Group data in the same article.
Roughly 80% of all the chips in the world are made in Northeast Asia. With local governments around the globe realizing the depth of the crisis, efforts for local manufacturing have increased. President Joe Biden launched Semiconductor ETFs A Great Bet Now: Here's Why ).
Against this backdrop, below we highlight a few ETF areas that could gain/lose against this backdrop.
h3 Winners/h3Semiconductor
No wonder,VanEck Vectors Semiconductor ETF QQQ which has a P/E of 33.92X and the valuation of SMH is almost on par with QQQ.
Investors can play SPDR S&P Semiconductor ETF (XSD), Invesco Dynamic Semiconductors ETF PSI and First Trust Nasdaq Semiconductor ETF (FTXL). Intel (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing (TSM) are some of the stocks that are likely to be the beneficiaries of the trend.
h3 Losers/h3Automotive
Auto bigwigs like Ford CARZ could be in a difficult spot in the coming days.
Consumers
XLY thus may come under pressure.
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