Semiconductor sales have been steadily rising over the past year, largely driven by the enthusiasm surrounding artificial intelligence (AI), particularly generative AI. Robust demand across multiple industries has led to significant revenue growth in the semiconductor sector over recent quarters. In fact, the semiconductor industry, a key segment of the broader tech market, played a key role in powering last year’s market upswing.
Given these positive trends, investing in semiconductor-focused mutual funds — such as DWS Science and Technology A KTCAX, Fidelity Select Technology Portfolio FSPTX, and Red Oak Technology Select ROGSX — may be a smart move.
According to the Semiconductor Industry Association (SIA), global semiconductor sales jumped a solid 2.5% sequentially in April, hitting $57 billion, up from $55.6 billion in March. Year over year, sales grew 22.7%. This marked the 11th consecutive month of year-over-year growth above 17%.
SIA President and CEO John Neuffer said, “Global semiconductor sales in April ticked up on a month-to-month basis for the first time in 2025, and the global market continues to notch year-to-year growth driven by increasing sales into the Americas and Asia Pacific.”
The initial decline in monthly sales this year was sparked by uncertainties over the future of U.S. tech companies in AI following the launch of the low-cost Chinese AI model DeepSeek. However, concerns eased quickly, with many experts viewing the launch as overly hyped.
The solid April performance followed an impressive 2024, when global semiconductor sales reached $627.6 billion, reflecting a 19.1% increase over 2023’s $526.8 billion. Fourth-quarter sales alone grew 17.1% year over year, totaling $170.9 billion.
The growth was largely fueled by rising demand for semiconductors in data centers, with memory chips contributing significantly to revenues. As tech firms continue to invest heavily in AI, the semiconductor industry is expected to benefit further. Experts predict strong demand to continue into 2025, with the SIA anticipating double-digit sales growth.
We have, thus, selected three mutual funds with significant exposure to semiconductor producers. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above 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).
DWS Science and Technology A fund seeks growth of capital. Under normal circumstances, KTCAX invests at least 80% of its net assets in common stocks of U.S. companies in the technology sector.
DWS Science and Technology A fund has a track record of positive total returns for over 10 years. Specifically, KTCAX’s returns over the three and five-year benchmarks are 18.6% and 17.1%, respectively. DWS Science and Technology A fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.88, which is lower than the 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.
Fidelity Select Technology Portfolio fund 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.
Specifically, Fidelity Select Technology Portfolio’s returns over the three and five-year benchmarks are 15.7% and 18.3%, respectively. FSPTX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.62%, which is lower than the category average.
To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Red Oak Technology Select fund seeks long-term capital growth by investing primarily in stocks of companies that rely extensively on technology in their product development or operations, or which may be experiencing growth in sales and earnings driven by technology-related products and services. ROGSX primarily invests in technology companies that develop, produce, or distribute products or services related to computers, semiconductors and electronics.
Red Oak Technology Select fund’s returns over the three and five-year benchmarks are 12.8% and 13.5%, respectively. ROGSX carries a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.92%
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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This article originally published on Zacks Investment Research (zacks.com).
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