Market Overview

Back The Blockchain With This ETF

Back The Blockchain With This ETF

Semiconductor stocks and exchange-traded funds were slammed last week as investors soured on what has been one of the best-performing corners of the already hot technology sector this year. The VanEck Vectors Semiconductor ETF (NYSE: SMH) slipped 6 percent last week.

Investors ditched semiconductor stocks in favor of financials, transportation stocks and other names levered to the Trump administration's tax overhaul efforts. Even with the recent slide, SMH is up nearly 39 percent year-to-date and the ETF remains an ideal way of playing the boom in blockchain technologies.

Blockchain is the central ledger of sorts for cryptocurrency, including bitcoin transactions. Amid increasing acceptance of blockchain technology, ETF issuers are scrambling to participate in that boom. November saw at least four ETF issuers file for blockchain ETFs, but with SMH already here, investors don't need to wait for dedicated blockchain funds.

SMH's Blockchain Exposure

SMH holds just 26 stocks, but two of those names are Nvidia Corporation (NASDAQ: NVDA) and Advanced Micro Devices, Inc. (NASDAQ: AMD), two semiconductor companies with intimate bitcoin exposure.

“The most important hardware components for mining are memory chips, graphics cards, and processors – all of which use vast quantities of semiconductors,” according to VanEck research. “For context, NVIDIA's GV100 graphics processing unit (GPU) includes 21.1 billion transistors – one of the simplest semiconductor devices.”

The $1.2 billion SMH allocates 20.6 percent of its combined weight to Taiwan Semiconductor Ltd. (NYSE: TSM) and Intel Corporation (NASDAQ: INTC).

Semiconductor ETFs: Easy Blockchain Access

“Blockchain technology and miners in particular are totally dependent on electronic components consisting of vast numbers of semiconductors,” said VanEck. “VanEck believes that exposure to semiconductor manufacturers, especially those who are suppliers to miners, offers a compelling investment opportunity. Investment exposure to semiconductors may provide access to both the growth potential of blockchain technology, as well as the entire blockchain economy.”

Last week, investors yanked $308.4 million from SMH, but the ETF still has year-to-date inflows of nearly $548 million.

Related Links:

Race For Blockchain ETF Heats Up

Analyst: Bitcoin Mining Will Mean Less For Semis In 2018, AMD Is More Exposed Than Nvidia


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