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3 Solid Mutual Funds to Buy on Soaring Semiconductor Sales

Semiconductor sales are rebounding, powered by the enthusiasm surrounding artificial intelligence (AI), particularly generative AI, which is boosting demand for AI chipsets. Also, the demand for semiconductors is rising again as inflationary pressures ease.

Global semiconductor sales totaled $46.4 billion in April, up 1.1% from March’s total of $45.9 billion, the Semiconductor Industry Association (SIA) said on Jun 6. On a year-over-year basis, semiconductor sales surged 15.8% in April.

John Neuffer, SIA president and CEO, said, “The global semiconductor industry posted double-digit sales increases on a year-to-year basis during each month of 2024, and worldwide sales in April increased on a month-to-month basis for the first time this year, indicating positive market momentum as we approach the middle of the year.”

“Additionally, the latest industry forecast projects strong annual growth in 2024, led by sales to the Americas market, which is expected to grow by more than 25% this year,” he added.

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Price pressures and higher interest rates owing to the Federal Reserve’s monetary tightening policy to curb sky-high inflation saw demand slowing, which had been hampering sales.

Inflation rose in the first quarter after declining sharply in 2023. This saw the semiconductor industry struggling in the first three months of the year. However, inflation cooled in April, which saw demand rebounding.

Also, several semiconductor manufacturers are shifting focus toward developing and producing AI chipsets given the growing enthusiasm surrounding AI. NVIDIA Corporation NVDA has been at the heart of this emerging AI space. This has seen its industry competitors also focus more on generative AI.

With demand rebounding, the semiconductor space is poised for growth in the near term. According to a recent report from the World Semiconductor Trade Statistics (WSTS), global semiconductor sales are projected to jump 16% in 2024 and 12.5% in 2025.

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to semiconductor producers. Each of these funds carries a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and is poised to gain from the favorable 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).

Fidelity Advisor Semiconductors Fund Class I FELIX fund seeks capital appreciation. FELIX invests primarily in common stocks. Fidelity Advisor Semiconductors Fund Class I normally invests at least 80% of its assets in securities of companies principally engaged in the design, manufacture, or sale of electronic components; equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Fidelity Advisor Semiconductors Fund Class I fund has a track of positive total returns for over 10 years. Specifically, FELIX’s returns over the three and five-year benchmarks are 26.4% and 31%, respectively. The annual expense ratio of 0.74% is lower than the category average of 1.02%. FELIX has a Zacks Mutual Fund Rank #2.

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 FSPTX 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 7.9% and 20.6%, respectively. The annual expense ratio of 0.68% is lower than the category average of 1.23%. FSPTX carries a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Janus Henderson Global Technology and Innovation Fund JNGTX aims for long-term growth of capital and specializes in technology. JNGTX invests the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.

Janus Henderson Global Technology and Innovation Fund has a track of positive total returns for over 10 years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 6.1% and 17.1%, respectively. The annual expense ratio of 0.80% is lower than the category average of 1%. JNGTX has a Zacks Mutual Fund Rank #2.

To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.

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