Semiconductor Sector Leads Gains, Solar Dims in 2024

The semiconductor sector dominated ETF performance this year, with the VanEck Semiconductor ETF (SMH) rising 40.4% year to date though Dec. 23, according to data from etf.com’s Markets Monitor tool.

Investors bet heavily on artificial intelligence and advanced computing. Technology companies poured billions into AI infrastructure development, pushing chip stocks past the SPDR S&P 500 ETF Trust (SPY), which gained 25.5% this year.

Internet and airline sectors also outperformed, with First Trust Dow Jones Internet Index Fund (FDN) rising 32.5% and U.S. Global Jets ETF (JETS) climbing 31.9% as the post-pandemic recovery continued to boost these sectors.

How Semiconductor Demand Shapes Markets

The semiconductor industry’s strength stems from increased demand for chips used in AI applications, cloud computing, and long-term growth prospects. Government support through initiatives like the CHIPS Act provided additional tailwinds for the sector.

Software companies showed resilience throughout the year, with the iShares Expanded Tech-Software Sector ETF (IGV) gaining 26%.

The SPDR S&P Insurance ETF (KIE) delivered returns of 25.5% as higher interest rates boosted the sector’s investment income, while the SPDR S&P Regional Banking ETF (KRE) rose 17.3%, as rising interest rates boosted their profitability.

On the opposite end, solar and clean energy ETFs struggled in 2024, as the Invesco Solar ETF (TAN) dropped more than 37%, while the Invesco WilderHill Clean Energy ETF (PBW) fell nearly 32%.

Traditional energy sectors also faced challenges, with VanEck Oil Services ETF (OIH) declining 16.4%, as oil prices moved lower throughout the year and demand for drilling decreased.

Agricultural sector ETFs also fell into negative territory, as the VanEck Agribusiness ETF (MOO) dropped 15.5% amid fluctuating commodity prices and weather-related challenges.

The metals and mining sector, represented by SPDR S&P Metals & Mining ETF (XME), posted a 5.3% decline, while the biotechnology sector, tracked by iShares Biotechnology ETF (IBB), dipped 2.5%.