Are Semiconductor Stocks Top Heavy?

Semiconductor stocks have rallied significantly higher over the past two months. Advances in artificial intelligence, autonomous driving and data centers have been key revenue drivers as tech companies continue to invest in the latest technologies. Micron Technology, Inc. and Nvidia Corporation have been the two most popular names, but many traders have turned to exchange-traded funds (ETFs) like the Direxion Daily Semiconductor Bull 3X Shares ETF.

The ETF seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), of the performance of the PHLX Semiconductor Sector Index, according to the fund’s sponsor. The index is up 17.6 percent in the period while the ETF has gained more than 60% since Sept. 7.

On Nov. 3, Bloomberg reported that Broadcom Limited is considering a $100 billion – or $70 per share – cash and stock bid for Qualcomm Incorporated, citing people familiar with the matter. The rumors sent Qualcomm shares up as much as 19% on Friday, while Broadcom shares rose about 5.5% on the news. Representatives for both companies declined to comment, but the news was certainly a boost for the sector late in the week. (See also: Opinion: Investors Put Their Chips on Broadcom Mega-Deal.)

Semiconductor stocks have been on a tear over the past couple of months, but many are trading at overbought levels. …read more

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