The semiconductor market has been trying to make a solid turnaround after a disappointing 2022. This year so far has been great, with sales making a solid recovery on higher demand from a range of industries.

Cooling inflation has once again been driving demand for semiconductors and the industry is projected to grow further in 2024. Given this situation, funds like Janus Henderson Global Technology and Innovation Fund (JNGTX Quick QuoteJNGTX - Free Report) , Fidelity Select Technology Portfolio (FSPTX Quick QuoteFSPTX - Free Report) and Putnam Global Technology Fund A Shs (PGTAX Quick QuotePGTAX - Free Report) are expected to benefit in the near term.

Semiconductor Sales Growing

Global semiconductor sales totaled $46.6 billion in October, increasing 3.9% month over month from September’s total of $44.9 billion, the Semiconductor Industry Association (SIA) reported. However, sales were down 0.7% year over year from October 2022’s total of $46.9 billion.

Although year-over-year sales are still down, the semiconductor market is making a solid rebound, with sales now having grown for the eighth straight month.

October’s jump follows a solid third quarter, wherein sales totaled $134.7 billion, increasing 6.3% from the second quarter.

The semiconductor industry, despite having an impressive 2022, started suffering in the second half as demand contracted owing to inflationary pressures. The Federal Reserve adopted an aggressive rate hike policy to curb inflation that saw it hiking interest rates by 525 basis points since March 2022.

Higher borrowing costs impacted demand, with sales taking a hit. However, as inflation continued to decline in the second quarter of 2023, sales started rebounding. Higher demand is expected to continue through 2024, which is going to boost sales.

According to the World Semiconductor Trade Statistics (WSTS), global semiconductor sales will fall 9.4% in 2023 but will surge 13.1% in 2024. According to WSTS, global sales will total $520 billion in 2023, down from the 2022 sales total of $574.1 billion. However, in 2024, global sales are projected to hit $588.4 billion.

The sustained and elevated demand for semiconductors can be attributed to the widespread adoption and increased use of consumer electronics on a global scale. Moreover, the expanding influence of transformative technologies like artificial intelligence, the Internet of Things, and machine learning plays a significant role in driving this demand across diverse industries.

Our Choices

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.

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).

Janus Henderson Global Technology and Innovation Fund aims for long-term growth of capital and specializes in technology. JNGTX invests at least 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 ten years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 3.4% and 14.6%, respectively. The annual expense ratio of 0.91% is lower than the category average of 1.05%. Janus Henderson Global Technology and Innovation Fund has a Zacks Mutual Fund Rank #1.

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  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. Most of the fund's holdings were in companies like Microsoft Corp (17.3%), Apple (17%) and Nvidia Corp (13.4%) as of Aug 31, 2023.

Specifically, Fidelity Select Technology Portfolio’s returns over the three and five-year benchmarks are 8% and 18%, respectively. The annual expense ratio of 0.70% is lower than the category average of 1.05%. 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.

Putnam Global Technology Fund A Shs aims for capital appreciation. PGTAX invests primarily in common stocks of large and mid-size companies worldwide. Putnam Global Technology Fund Class A invests the majority of its assets in securities of companies in the technology industries.

Specifically, Putnam Global Technology Fund A Shs’returns over the three and five-year benchmarks are 7.2% and 17.2%, respectively. The annual expense ratio of 0.83% is lower than the category average of 1.05%. PGTAX carries a Zacks Mutual Fund Rank #2.

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

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