Investing in semiconductor stocks in 2025
There have been numerous developments in the field of artificial intelligence in recent years. This is also linked to microchips and semiconductors, which are increasingly in demand in our highly digitalised world. In this article, we look at how investors can benefit from this change in the form of semiconductor stocks.
In brief:
- Due to increasing digitalisation, the semiconductor sector could be further expanded in the future.
- We will show you what problems can arise with semiconductor stocks.
- In this article, you can find out which specific semiconductor stocks are available and which alternatives could provide better protection for your portfolio.
What are semiconductor stocks?
Many current trends require chips to function. These include 5G and electromobility. Chips are installed in a wide variety of devices, which has led to a sharp increase in demand. The field of artificial intelligence has also had a strong influence on the industry.
Semiconductor companies are involved in the development and manufacture of components for the electronics industry. This includes chips, which are often in short supply. American and Asian companies dominate this market. Investors can also benefit from such stocks.
Is it worth investing in semiconductor stocks?
The question now arises as to whether it makes sense to invest in semiconductor stocks or not. As already mentioned, there are many different industries that require chips. Due to increasing digitalisation, it is entirely possible that areas such as AI and electromobility will continue to grow, which will have an impact on demand.
- If you want to earn money with stocks, you should also consider the risk.
- Semiconductor companies specialise in the same industry
- You should definitely bear this lack of diversification in mind if you are interested in semiconductor stocks.
- A lack of diversification can significantly increase the risk of your portfolio.
If you invest in a single sector, it may perform worse than expected. This means that you could incur significant losses if you have only invested in one area.
The same applies if you invest exclusively in one country or one company. Therefore, make sure you diversify sufficiently if you want to grow your money and are interested in the semiconductor sector. If you want to invest, it is important that you have sufficient knowledge of this industry and can realistically assess the risks.
Semiconductor stocks with strong fluctuations
In addition to low diversification, it is also important to note that company shares in this sector are considered cyclical and fluctuate greatly. If there is high demand for electronic devices such as cars, mobile phones or computers, demand for chips also rises.
When there is a boom, manufacturers often struggle to keep up. However, when demand for electronic devices falls, this can lead to overcapacity and price competition among retailers. Basically, you have to expect fluctuations if you want to invest in this type of stock.
These semiconductor stocks are available
In this section, we present examples of company shares from this sector. We show you what they specialise in, what they manufacture and provide further information about their background.
NVIDIA
This group is the global market leader in the field of high-performance processors. Such processors are used, for example, in the automotive and gaming sectors. NVIDIA is not involved in manufacturing, but works primarily in the development and research of new components.
- NVIDIA is now one of the strongest companies in the chip sector and has recorded impressive growth.
- NVIDIA, for example, is working on innovative ideas for the metaverse, such as applications for Omniverse software.
- They are also developing chips that are used in crypto mining.
Qualcomm
The American company is one of the largest chip manufacturers worldwide. Qualcomm is active in the field of wireless communication. They offer software, semiconductors and various services. One area of application, for example, is components for 3G, 4G and 5G transmissions.
The company’s figures and profits are also promising and may represent opportunities for investors. Qualcomm chips are used in many iPhones, for example. Share buyback programmes also increase demand for the company’s shares.
In the past, Qualcomm has frequently had problems with antitrust authorities because it has a monopoly position, so to speak. Despite this market dominance, the company is valued more favourably than NVIDIA.
Semiconductor stocks as ETFs?
Are the risks associated with stocks or the high research costs too much for you? You could also invest in semiconductor ETFs, also known as exchange-traded funds. These are index funds that are traded on the stock exchange. You can think of a fund as a kind of investment pot into which investors pay jointly.
A distinction can be made between active and passive funds. An active fund is managed by a fund manager. Their task is to put together the fund and select suitable positions. Their goal is to beat the average market return and thus achieve an excess return.
Investing money in ETFs and other advantages:
- These are passive funds, which is why the fees are particularly low. Incidentally, one of the most important ETF tips is to compare the running costs.
- Investing for beginners: ETFs are easy to understand and suitable for beginners.
- ETFs are liquid. You can trade them at any time during normal stock exchange opening hours.
- It is a transparent asset class: you can read through the composition on the provider’s website and thus prevent potential cluster risks.
- If you consider the basics of investing, it is a safe investment.
- Furthermore, ETFs are part of the special fund. In the event of the broker or bank becoming insolvent, the money invested is therefore protected.
Good to know:
These are thematic ETFs that specialise in a specific sector, such as a solar ETF. Although they are more diversified than investing in individual semiconductor stocks, they are still not broadly diversified and contain significantly fewer companies than global ETFs.
One example of such an ETF is the iShares MSCI Global Semiconductors UCITS ETF. It contains 278 positions and is accumulating. It replicates physically and has a TER of 0.35 per cent. The fund is domiciled in Ireland. The fund was launched in 2021, so it is still relatively young.
The VanEck Semiconductor UCITS ETF, for example, offers an alternative. Here, too, the total expense ratio is 0.35 per cent. However, with 25 positions, this ETF is significantly less diversified. The ETF is physically replicated and has an accumulating dividend policy.
Advantages and disadvantages of ETFs
ETFs can invest in different asset classes, such as stocks or commodities. They have one key advantage: with an ETF, you can invest in a large number of stocks using a single security. This diversification allows you to easily reduce the risk of an investment.
Investing money in ETFs and other advantages:
- These are passive funds, which is why the fees are particularly low. Incidentally, one of the most important ETF tips is to compare the running costs. Due to their passive nature, you can expect costs of no more than 0.8 per cent. Only specialised thematic ETFs are associated with higher fees. Active funds charge fees of 1.5 to 2 per cent of the fund’s assets and are therefore significantly more expensive.
- Investing for beginners: ETFs are easy to understand and suitable for beginners. You only need to invest time once to understand how they work. Then you can research a specific ETF and develop your investment strategy. Your investment will then work automatically and for you!
- It is a high-yield investment. With ETFs, you can achieve the return of the respective index. This asset class allows you to invest in high-yield stocks, but at the same time can increase security due to its high diversification. This allows you to build your wealth more efficiently.
- The chances of attractive returns are linked to inflation. Inflation is a general increase in prices. Investors who put their money into traditional investments, such as savings accounts, can hardly earn any interest and cannot offset inflation. It devalues their assets, meaning that savers can buy fewer and fewer products for the same amount of money. ETFs can offset inflation due to their attractive returns.
- ETFs are liquid. You can trade them at any time during normal stock market hours and easily convert them into cash. This is much more difficult with many active funds. Even though these securities can be sold quickly and easily, it is important to remember that they are a long-term investment. You should have a detailed plan for buying and selling and not sell your shares on impulse.
- It is a transparent asset class: you can read through the composition on the provider’s website and thus prevent potential cluster risks. You can ensure that no country is overrepresented and that your investment is diversified across sectors.
- If you take the basics of investing into account, it is a safe investment. One of the most important basics is diversification. In addition, ETFs are classified as special assets. This means that your bank or broker must keep the invested money separate from their own assets. In the event of insolvency, investors’ shares are therefore protected.
- Many ETFs are eligible for savings plans. This means that you don’t need to have a large amount of capital to invest. Instead, you can choose a specific period, such as monthly or quarterly, and invest smaller amounts. These savings plans are also very flexible: you can change them at any time and adjust your savings rate. If you need to skip a month because you have other expenses, that’s no problem either.
In addition to these advantages, there are also disadvantages to consider. ETFs, like stocks, are traded on the stock exchange. This means that investors must expect price fluctuations with this asset class. Before investing, you should make sure that you can cope with price fluctuations. You can start investing with smaller amounts. You can counteract this risk with a long investment horizon.
Thematic ETFs specialise in a specific sector, such as solar ETFs. Although they are more diversified than investing in individual semiconductor stocks, they are still not broadly diversified and contain significantly fewer companies than global ETFs. This makes them riskier.
There are ETFs with physical and synthetic replication methods. In short, this refers to how the security replicates the index. Synthetic replication is more complex than physical replication and involves counterparty risk.
Examples of semiconductor ETFs
One example of such a semiconductor ETF is the iShares MSCI Global Semiconductors UCITS ETF. It contains 278 positions and is accumulating. It replicates physically and has a TER of 0.35 per cent. The fund is domiciled in Ireland. The fund was launched in 2021, so it is still relatively young.
The VanEck Semiconductor UCITS ETF, for example, offers an alternative. Here, too, the total expense ratio is 0.35 per cent. However, with 25 positions, this ETF is significantly less diversified. The ETF is physically replicated and has an accumulating dividend policy.
Conclusion: Investing in semiconductor stocks – also possible as an ETF
Chips are needed in a wide variety of areas within the electronics industry. Concrete examples include developments in recent years in electromobility, 5G and the expansion of artificial intelligence.
Semiconductor stocks are issued by companies that offer services in this field, develop chips or manufacture them themselves. Due to the increasing upturn in the above-mentioned areas, this industry may continue to grow in the future. However, it is impossible to predict how this development will unfold.
If you are interested in company shares from this sector, you should bear in mind the low diversification and strong price fluctuations. For example, we have introduced you to the two company shares from NVIDIA and Qualcomm.
If you want to increase your diversification, semiconductor ETFs could be an alternative for you. Although they are not as diversified as global ETFs, they are significantly more diversified than investing in individual semiconductor stocks. In addition, they are comparatively inexpensive and easy to understand.
This is a financial investment that is also suitable for beginners. As examples, we have mentioned the iShares MSCI Global Semiconductors UCITS ETF and the VanEck Semiconductor UCITS ETF.
You may also be interested in the sections ‘Scalable Capital vs. Trade Republic’, ‘Trade Republic reviews’.
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