Semiconductor sales have been growing at a steady pace over the past year, powered by optimism surrounding artificial intelligence (AI), especially generative AI. Demand from various sectors has seen semiconductor revenues soar over the past few quarters.
In fact, semiconductors, which are part of the broader tech sector, were primarily responsible for last year’s market rally.
Given this situation, investing in semiconductor funds, such as DWS Science and Technology A KTCAX, Fidelity Select Technology Portfolio FSPTX and Red Oak Technology Select ROGSX appears to be a prudent choice.
Semiconductor Sales Jump Year Over Year
Global semiconductor sales jumped 17.1% year over year in February, totaling $54.9 billion, compared to $46.9 billion in February 2024, the Semiconductor Industry Association (SIA) reported last week. This was also the 10th straight month that semiconductor sales rose more than 17% on a year-over-year basis.
Monthly sales fell 2.9% in February. John Neuffer, SIA president and CEO, said, “Despite a slight decline in month-to-month sales, the global semiconductor industry hit its highest-ever monthly sales total for the month of February, driving strong year-to-year growth.”
The decline in monthly sales in February can be attributed to growing concerns over the future of U.S. tech firms in the AI sector, especially after the highly publicized launch of the more affordable Chinese competitor, DeepSeek. However, the fears were short-lived as experts believed the launch of DeepSeek was overhyped.
Semiconductor Market Poised to Grow
The robust February figures follow a solid performance in 2024 for the semiconductor industry, with global sales reaching $627.6 billion, a 19.1% increase from the 2023 total of $526.8 billion. In the fourth quarter alone, sales rose 17.1% year over year to $170.9 billion, with a 3% jump from the previous quarter.
The soaring sales are being fueled by increasing demand for semiconductors in data centers. The memory segment, in particular, has played a major role in generating revenues. Several tech firms have been pumping millions of dollars into AI development, and those incorporating AI into their products have seen impressive growth in recent years.
Industry experts remain optimistic about AI’s enormous untapped potential and expect demand to keep climbing as more semiconductor companies join the AI space. The SIA also forecasts double-digit sales growth in 2025.
3 Best Choices
We have, thus, selected three mutual funds with significant exposure to semiconductor producers. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three- and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
DWS Science and Technology A fund seeks growth of capital. Under normal circumstances, KTCAX invests at least 80% of net assets in common stocks of U.S. companies in the technology sector.
DWS Science and Technology A fund has a track of positive total returns for over 10 years. Specifically, KTCAX’s returns over the three and five-year benchmarks are 12.1% and 20%, respectively. DWS Science and Technology A fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.88, which is lower than its category average.
To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.
Fidelity Select Technology Portfolio fund seeks capital appreciation by investing most of its assets in common stocks of companies principally engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements.
Specifically, Fidelity Select Technology Portfolio’s returns over the three and five-year benchmarks are 2.4% and 10%, respectively. FSPTX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.64%, which is lower than the category average.
To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Red Oak Technology Select fund seeks long-term capital growth by investing primarily in stocks of companies that rely extensively on technology in their product development or operations, or which may be experiencing growth in sales and earnings driven by technology-related products and services. ROGSX primarily invests in technology companies that develop, produce, or distribute products or services related to computers, semiconductors and electronics.
Specifically, Red Oak Technology Select fund’s returns over the three and five-year benchmarks are 8.2% and 16.3%, respectively. ROGSX carries a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.92% .
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