Published on 19 Jun 2024 on Zacks · via Yahoo Finance

Best-Performing Stocks of the Top ETF of the First Half

VanEck Vectors Semiconductor ETF SMH, which targets the U.S. semiconductor sector, has surged 51.5% this year, becoming the top-performing ETF of the first half.Although most of the stocks in SMH’s portfolio delivered strong returns this year, a few have gained more than 45%. These are NVIDIA Corporation NVDA, Taiwan Semiconductor Manufacturing TSM, Micron Technology MU, Broadcom AVGO and Qualcomm Incorporated QCOM.Semiconductor stocks have led the market rally, buoyed by the artificial intelligence (AI) drive.  The expansion of AI applications holds the promise of ushering in fresh growth opportunities in the sector. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030 and continue to drive the market higher (read: Bet on AI Ecosphere With These ETFs).NVIDIA, Apple (AAPL) and Microsoft (MSFT) are in a race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities. NVIDIA has been at the forefront of building AI into its products and services (read: ETFs to Tap as NVIDIA Becomes the Most Valuable Company).Semiconductors have been the most important drivers of the overall growth in technology, given the use of chips in day-to-day life, from cars and electronic gadgets to planes and weapons. Demand will continue to trend higher, given increased digitization in various corners like healthcare, transport, financial systems, defense, agriculture and retail. The rapid adoption of cutting-edge technology like cloud, Internet of Things, autonomous cars, gaming, wearables, VR headsets, drones, virtual reality devices, cryptocurrencies, 5G, and other advanced information technologies should continue to fuel growth. Further, the introduction of expensive and new-generation chips has been driving an enhancement in the product mix for semiconductors.In its latest meeting, the Fed penciled in one rate cut this year and foresees four cuts for 2025. The central bank has altered the language in its statement, noting that there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress. This signals a period of higher interest rates for a while. Tech titans have shown strong resilience amid such a scenario. And, when the Fed starts cutting rates later this year, these stocks will receive a boost. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.Let’s take a closer look at the fundamentals of SMH.

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