ETF Edge, February 5, 2024

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Semiconductor Industry

Semiconductors now account for nearly 9% of the S&P 500, comparable to the software sector.
Recent gains in the semiconductor industry are attributed to strong earnings and the AI narrative.
A few large companies, including Nvidia, AMD, Taiwan Semi, ASML, and Broadcom, drive most of the gains within the semiconductor industry.
Companies like Nvidia have wide moats and competitive advantages due to their technological lead and high barriers to entry, resulting in significant pricing power.
The concentration of growth within the tech sector, particularly in semiconductors, raises concerns about market overvaluation and potential mean reversion.
Despite near-term challenges, the long-term outlook for semiconductors remains positive due to increasing demand driven by AI and the ongoing shift towards digitalization.
Investors should be aware of the differences between various semiconductor ETFs and carefully consider the weighting methodologies before investing.
VanEck's semiconductor ETF (SMH) has outperformed other semiconductor ETFs due to its focus on large-cap companies.

Gold miner ETFs have experienced outflows despite rising gold prices due to factors such as investor interest in other assets like technology stocks and Bitcoin.
The oil and energy sector has lagged the S&P 500 due to declining oil prices, but there is potential for growth due to increasing global oil demand.

VanEck's uranium and nuclear stocks ETF (NLR) provides exposure to the nuclear energy sector, including utilities that own nuclear facilities.
Policy risks and regulatory setbacks have challenged the nuclear energy sector, but there are signs of a potential policy reversal.

The energy sector is still trying to determine its future direction.
Hydrocarbons are not going anywhere, but supply and demand are currently low, partly due to China's economic situation.
The solar energy space is still challenging, and wind, offshore, and nuclear energy have also faced difficulties recently.
The low prices in the energy sector are not irrational, and the outperformance of nuclear energy compared to the larger energy sector is understandable.
The support needed for the energy sector is better global growth, and China's recession is significantly impacting the sector.

Commodities are underperforming compared to other investments but not severely considering the current state of global growth.
China's economic situation is a significant factor affecting the energy sector and the broader commodities market.