Some have said semiconductors are the new oil. The stock market agrees.
Our featured chart this week shows the ratio of the Philadelphia Stock Exchange Semiconductor Index to the S&P 500 Index. This essentially illustrates how the semiconductor sector has performed relative to the broader stock market over the years. As you can see, it’s gone parabolic recently, reaching its highest level since 2000.
If there’s one chart that sums up what’s driving the stock market this year, it’s this one. In our modern world filled with smartphones, computers, and other electronics, semiconductors are the vital input—the oil, if you will—that is central to basically everything. Plus, there’s a ton of excitement around artificial intelligence (AI) right now, and semiconductor stocks are benefiting directly from this increased flow of investable capital—selling the proverbial shovels in a gold rush.
For investors, this surge in semiconductor stocks is mostly positive—it’s boosting profits in the U.S. stock market and could keep pushing the overall market higher. But remember, investing always carries risks. So, when the market gets a bit frothy like this, it’s a good reminder to know what you own in your portfolio and have a plan in place ahead of time to manage any potential risks.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.
The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S
The Philadelphia Semiconductor Index (SOX) is an index that tracks the performance of semiconductor stocks traded on the Philadelphia Stock Exchange. It includes companies involved in the design, manufacture, and sale of semiconductors. The index provides investors with a benchmark to gauge the overall performance of the semiconductor industry.