SMH Trading Strategy (Semiconductor)

Let’s take a look at the semiconductor industry and an SMH Trading Strategy.

The semiconductor industry is the backbone of the tech revolution of the past decades and stocks in the industry dominate the IT sector of the S&P 500. SMH provides a way to invest in a portfolio of these semiconductor stocks.

SMH is the ticker symbol for the VanEck Vectors Semiconductor ETF, a 25-stock basket that tracks the performance of the semiconductor industry. The ETF provides a way to invest in the semiconductor industry and gain exposure to the biggest stocks in the industry.

What are semiconductors?

A semiconductor is a product that conducts electricity more than an insulator, such as glass, but less than a pure conductor, such as copper or aluminum. It is usually made of silicon, but to meet the specific needs of the electronic component it is used for, its conductivity and other properties can be altered with the introduction of impurities, in a process known as doping.

Semiconductor products, often referred to as microchips or semis, can be found in thousands of products such as computers, smartphones, appliances, gaming hardware, cryptocurrency mining devices, and medical equipment.

The 5 largest stocks in the sector

These are five of the largest semiconductor stocks:

  • Taiwan Semiconductor Manufacturing Company Limited (TSM): The company is most famous for making Apple M series chips that are taking the computer industry by storm. It is the main company that produces microchips for major semiconductor companies in the US, including Broadcom Inc. TSM is listed on both the Taiwan Stock Exchange and the New York Stock Exchanges. It is the highest-valued semiconductor company in the world, with a market cap of $447.3 billion as of July 27, 2022. It pays good dividends with a 1.86% yield as of November 2021. Surely, one of the best semiconductor stocks to own.
  • NVIDIA Corporation (NVDA): This is a major manufacturer of graphics processors used not only for gaming and 3D rendering but also in cryptocurrency mining rigs. At $431.8 billion as of July 27, 2022, NVIDIA has one of the largest market caps in the US semiconductor industry. It is definitely one of the best semiconductor stocks to buy.
  • Broadcom Inc. (AVGO): The company designs, develops, and supplies microchips for smart devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V based products worldwide. However, it outsources the production to TSMC. At $211.5 billion as of July 27, 2022, the company has one of the largest market caps in the US semiconductor market and is surely a stock to watch.
  • QUALCOMM Incorporated (QCOM): The company engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies for use in wireless voice and data communications, networking, application processing, multimedia, and global positioning system products. Its market cap as of July 27, 2022, is $169.7 billion.
  • Intel Corporation (NASDAQ: INTC): the company designs, manufactures, and supplies chips for computer products and smart technologies worldwide. Intel has a leading market share in chips for personal computers and servers, despite competition from companies like AMD. In fact, it is the largest chip company in the industry by revenue. As of July 27, 2022, its market cap is $162.0 billion.

FAQ:

What are semiconductors and what is their role in the tech industry?

Semiconductors are products that conduct electricity more than insulators but less than pure conductors. Typically made of silicon, these microchips are integral components found in various electronic devices, including computers, smartphones, appliances, gaming hardware, cryptocurrency mining devices, and medical equipment.

How does NVIDIA Corporation (NVDA) contribute to the semiconductor industry?

NVIDIA is a major manufacturer of graphics processors, widely used not only for gaming and 3D rendering but also in cryptocurrency mining rigs. With a substantial market cap, it stands as one of the leading semiconductor stocks.

What is Intel Corporation’s (INTC) position in the semiconductor market?

Intel designs, manufactures, and supplies chips for computer products and smart technologies globally. Despite competition, it holds a leading market share in chips for personal computers and servers, making it the largest chip company in the industry by revenue.

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