Market Extra: Semiconductor ETFs close mixed amid fears of an industry ‘down cycle,’ Pelosi trip to Taiwan

by | Aug 2, 2022 | Stock Market

Battered exchange-traded funds focused on semiconductor stocks ended mixed Tuesday, amid concerns about a “down cycle” in the sector and U.S. House Speaker Nancy Pelosi’s visit to major chip-producer Taiwan.  The SPDR S&P Semiconductor ETF
closed 0.9% higher Tuesday, while the VanEck Semiconductor ETF
and iShares Semiconductor ETF
each slipped 0.2% after seeing gains earlier in the session, according to FactSet data. 

Taiwan manufactures “more than 60% of the world’s semiconductors,” wrote Tom Essaye, founder and president of Sevens Report Research, in a note Tuesday. “If China invades Taiwan and takes over all these manufacturing facilities, they will essentially have major economies that depend on semiconductors over a proverbial barrel.” Wells Fargo Investment Institute warned in an investment strategy report Tuesday of increased risks for “an inventory-led correction for the semiconductor industry,” citing a recent forecast from a foundry in Taiwan.  “Our views were confirmed when the largest semiconductor manufacturing foundry in Taiwan recently shared its forecast of a broad semiconductor down cycle, led by an inventory correction cycle expected to occur from the second half of 2022 through the first half of 2023,” a Wells Fargo equity sector analyst wrote. Read: Chip sales stay hot, but analysts warn of impending freeze Also see: Why semiconductor stocks are ‘almost uninvestable’ despite record earnings amid a global shortage Shares of Taiwan Semiconductor Manufacturing Co.
which makes chips used in personal computers, communications systems, automotive and industrial equipment and consumer electronics, closed 0.3% lower Tuesday, after trading up earlier in the session. The company’s stock has tumbled more than 28% so far in 2022, according to FactSet data. Semiconductor-focused exchange-traded funds have also suffered this year. The VanEck Semiconductor ETF is down more than 23% so far in 2022, while the SPDR S&P Semiconductor ETF and iShares Semiconductor ETF each have tanked more than 24%, according to FactSet data.  “As the U.S. Federal Reserve aggressively raises interest rates to comb …

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