Taiwan Quake Ripples Across Semiconductor ETFs
The 7.4 magnitude earthquake disrupts a major technology manufacturing hub.
The biggest earthquake to hit Taiwan in 25 years is raising concerns about global semiconductor supply disruptions and sparked a leap in trading of ETFs that focus on chip manufacturing.
The 7.4 magnitude quake hit Hualien on the east coast of the island nation at 8 a.m. local time Wednesday, reportedly injuring at least 1,000 people with an initial death toll of more than two dozen people.
Markets responded to Taiwan's ranking as the world's center of semiconductor manufacturing, churning out 60% of the world's chips, according to a 2023 Economist article. The country is home to Taiwan Semiconductor Manufacturing Co., the world's biggest contract manufacturer of semiconductors, which halted some production today, the Wall Street Journal reported.
Those chips are critical to an ever-increasing list of industrial and consumer products, including surging artificial intelligence.
The Direxion Daily Semiconductor Bear 3X Shares (SOXS), which bets on falling prices of semiconductor industry stocks, was the most actively-traded exchange-traded fund this afternoon, with more than 86 million traded, according to etf.com data. That fund dropped 1.4%. The Direxion Daily Semiconductor Bull 3X Shares (SOXL) jumped 1.5% and more than 35 million shares were traded.
Semiconductor ETF Activity Jumps
The largest semiconductor ETF, the $18.4 billion VanEck Semiconductor ETF (SMH), was up less than 1%. That fund's main holdings are based in the U.S. The story was similar for the second-largest semiconductor ETF, the $12.7 billion iShares Semiconductor ETF (SOXX). SMH and SOXX have gained 30% and 19%, respectively, from the start of the year.
The largest Taiwan-focused ETF, the $4.1 billion iShares MSCI Taiwan ETF (EWT), was little changed.
The third-largest fund in the category, the $11 billion Direxion Daily Semiconductor Bull 3X Shares (SOXL), which leverages three times the daily exposure of an index of U.S. listed semiconductor companies, was up 2% in midday trading Wednesday and has gained 53% this year.
Taiwan’s potential manufacturing interferences also has implications for select technology companies, including Apple Inc. and Nvidia Corp.
According to etf.com, the $66 billion Vanguard Information Technology ETF (VGT) leads all ETFs with a 22% weighting in Apple, followed by the $65.5 billion Technology Select Sector SPDR Fund (XLK) with a 20% weighting in Apple.
The ETF with the most exposure to Nvidia, at 28%, is the $852 million ProShares Ultra Semiconductors ETF (USD), followed by VanEck’s SMH at 25%.
