Intel INTC has been showing a remarkable surge in its stock price, marking its longest winning streak since the 1980s. The strong momentum is driven by a combination of political developments, strategic business moves and market speculation. Intel stock has added more than $200 billion in value over the past two weeks.
Investors seeking to tap the growth prospects could invest in ETFs having the highest allocation to the semiconductor player. These include First Trust Nasdaq Semiconductor ETF FTXL, REX FANG & Innovation Equity Premium Income ETF FEPI, Xtrackers Semiconductor Select Equity ETF CHPS, ProShares Nanotechnology ETF TINY and VanEck Vectors Semiconductor ETF SMH.
Investors should note that these funds have spread out exposure to a number of firms in various types of industries, suggesting that these can easily counter shocks from some of the industry’s biggest components.
Here are the reasons for the hot streak in Intel stock price:
Political Support for Domestic Chip Manufacturing: U.S. Vice President J.D. Vance emphasized the administration's commitment to bolstering domestic semiconductor production. At an AI summit in Paris, Vance highlighted plans to ensure that AI chips are both designed and manufactured within the United States, aiming to safeguard American technological leadership. This political backing has instilled confidence among investors regarding Intel's future prospects.
Potential Partnerships and Acquisitions: According to reports, Taiwan Semiconductor Manufacturing Company TSM is rumored to be considering a stake in Intel's chip manufacturing facilities, while Broadcom AVGO has shown interest in Intel's chip design and marketing divisions. These speculations have fueled optimism about Intel's strategic restructuring and potential value realization (see: all the Technology ETFs here).
Divestment of Non-Core Assets: Intel is reportedly in discussions about selling a majority stake in its Altera programmable chip unit to private equity firm Silver Lake Management. This move aligns with Intel's strategy to streamline operations and focus on core competencies, potentially enhancing financial flexibility for future investments.
Intel, once dominant in the chip industry, has struggled to regain its technological edge and lost market share to rivals in recent years. The combination of factors could bring back its allure. However, the potential TSMC and Broadcom deals may encounter regulatory scrutiny, especially concerning national security and antitrust considerations.
ETFs in Focus
First Trust Nasdaq Semiconductor ETF (FTXL)
First Trust Nasdaq Semiconductor ETF offers exposure to the most liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. FTXL holds 31 stocks in its basket, with Intel taking the second spot at 10% share (read: ETFs in Focus Post Intel's Q4 Earnings Beat).
First Trust Nasdaq Semiconductor ETF has $304.3 million in AUM. The average trading volume is good at around 270,000 shares and the expense ratio is 0.60%. FTXL has a Zacks ETF Rank #1 (Strong Buy).
REX FANG & Innovation Equity Premium Income ETF (FEPI)
REX FANG & Innovation Equity Premium Income ETF is an actively managed ETF providing exposure to leading tech firms within the equally weighted FANG & Innovation Index. It aims for enhanced income by selling out-of-the-money call options, harnessing big tech’s volatility while capping some of the potential stock gains. FEPI also uses the covered call approach to counterbalance potential market declines, seeking to offer mitigation from price declines on these big tech stocks.
REX FANG & Innovation Equity Premium Income ETF holds 41 stocks in its basket, with Intel occupying the top spot with a 6.8% share. It trades in an average daily volume of 173,000 shares.
Xtrackers Semiconductor Select Equity ETF (CHPS)
Xtrackers Semiconductor Select Equity ETF seeks to track the Solactive Semiconductor ESG Screened Index. It holds 52 stocks, with INTC being the top firm with a 5.4% share. Xtrackers Semiconductor Select Equity ETF charges 15 bps in annual fees and has AUM of $7.5 million. It trades in an average daily volume of 1,000 shares.
ProShares Nanotechnology ETF (TINY)
ProShares Nanotechnology ETF invests in companies that help businesses use nanoscale technology to transform lives and revolutionize industries. It follows the Solactive Nanotechnology Index and holds 30 securities in its basket with Intel occupying the third position at 5.2% share.
ProShares Nanotechnology ETF has accumulated $5.7 million in its asset base and trades in an average daily volume of 1,000 shares. It charges 58 bps in fees annually from investors.
VanEck Vectors Semiconductor ETF (SMH)
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index, which tracks the most liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket, with Intel occupying the sixth position at 4.5% (read: Should You Apply "Buy the Dip" Strategy in Tech ETFs?).
VanEck Vectors Semiconductor ETF has managed assets worth $23.5 billion and charges 35 bps in annual fees and expenses. SMH trades in an average daily volume of 6 million shares and has a Zacks ETF Rank #1 with a High risk outlook.
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