Home etftrends.com U.S.-China Competition Could Push Semiconductor ETF Even Higher

U.S.-China Competition Could Push Semiconductor ETF Even Higher

Technology represents the current field of battle when it comes to competition between the United States and China. In particular, the semiconductor industry could continue to push the Direxion Daily Semiconductor Bull 3X ETF (SOXL) higher as the two largest economic superpowers continue to go head to head.

Government backing was necessary to compete with China, and the U.S. responded in tow with CHIPS and Science Act. The U.S., however, is not looking to stay with China step for step but to widen the gap in terms of technological advancement in the semiconductor industry.

“We previously maintained a ‘sliding scale’ approach that said we must stay only a few generations ahead. That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large a lead as possible,” said National Security Advisor Jake Sullivan at the Special Competitive Studies Project Global Emerging Technology Summit in Washington, DC, per an Atlantic Council report.

Geopolitical tensions certainly play a large part in the semiconductor battlefield, as the report discussed. The U.S. is not only looking to manufacture the highest quality chips but also to limit China’s ability to produce competitive alternatives of its own via trade restrictions, for example.

“The global semiconductor supply chain is coming under increasing strain as US-China tensions magnify the vulnerabilities of an industry built on once-unfettered cross-border trade and investment,” the Atlantic Council report noted. “U.S. export restrictions aimed at restraining China’s progress in advanced chip manufacturing are amplifying business risks and straining diplomatic relationships with American allies.”

Domestic Investment Could Push SOXL Higher

With government backing, the semiconductor industry should benefit as a whole. This bodes well for SOXL, which seeks daily investment results equal to 300% of the daily performance of the PHLX Semiconductor Sector Index, which measures the performance of domestic companies engaged in the design, distribution, manufacture, and sale of semiconductors.

In recent news, U.S. chip company Applied Materials is already looking to invest in a $4 billion research center in Silicon Valley. The project is a byproduct of government funding via the aforementioned CHIPS and Science Act, which will also help create jobs in the process as the U.S. looks to compete with China.

“We’re absolutely going to go forward. The scale of how fast we invest is going to be tied to the government incentives,” Gary Dickerson, CEO of Applied Materials, told Reuters. “The economics of this are compelling in terms of accelerating the technology road maps for our customers and also for Applied.”

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