3 Mutual Funds to Buy on Robust Growth in Semiconductor Sales

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Semiconductor sales have been soaring at a solid pace over the past few months after an unimpressive start to 2024 following a slowdown. The optimism surrounding artificial intelligence (AI), particularly, generative AI, has been fueling robust demand for microchips.

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However, a lot still needs to be explored in the AI space, and a large number of tech companies are investing aggressively to grab a bigger chunk in the future. Needless to say, investing in semiconductor funds like Fidelity Select Semiconductors Portfolio FSELX, DWS Science and Technology A KTCAX and Fidelity Advisor Semiconductors Fund Class I FELIX thus appears to be a prudent choice.

The Semiconductor Industry Association (SIA) reported on Tuesday that global semiconductor sales totaled $57.8 billion in November, up 20.7% year over year and 1.6% from October’s $56.9 billion.

The robust performance of tech stocks, which played a significant role in last year’s market rally, has been largely driven by NVIDIA. As a frontrunner in generative AI, NVIDIA has spurred widespread interest and progress in the field.

Many tech companies are making substantial investments in AI and its advancement. Businesses that have deeply integrated AI into their offerings have seen notable growth in recent years.

Experts view AI as a field with enormous untapped potential and much to uncover. This growing excitement is anticipated to further fuel demand as more semiconductor manufacturers join the AI race.

AI-specific chips have become indispensable, with applications spanning various industries, from high-performance computing to everyday consumer devices. Meanwhile, memory components like NAND flash and DRAM are witnessing a rebound in demand, meeting specialized computing needs and powering AI-driven tasks. In this context, semiconductor stocks are expected to perform well in the near future.

We have, thus, selected three mutual funds with significant exposure to semiconductor producers carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three- and five-year returns. Additionally, the minimum initial investment is within $5000.

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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 Select Semiconductors Portfolio fund seeks capital appreciation. FSELX normally invests at least 80% of assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards, and other components); equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Fidelity Select Semiconductors Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSELX’s returns over the three and five-year benchmarks are 19.2% and 32.6%, respectively. FSELX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.63, which is lower than its category average of 1.25%.

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

DWS Science and Technology A fund seeks growth of capital. Under normal circumstances, KTCAX invests at least 80% of net assets in common stocks of U.S. companies in the technology sector.

DWS Science and Technology A fund has a track of positive total returns for over 10 years. Specifically, KTCAX’s returns over the three and five-year benchmarks are 11.6% and 20.7%, respectively. KTCAX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.87%, which is lower than its category average of 1.03%

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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Fidelity Advisor Semiconductors Fund Class I fund seeks capital appreciation. FELIX invests primarily in common stocks. Fidelity Advisor Semiconductors Fund Class I normally invests at least 80% of 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 17.5% and 31.2%, respectively. FELIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.71%, which is lower than its category average of 1.01%.

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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