Worsening supply chain disruptions due to sanctions placed on Russia in response to its invasion of Ukraine have been deepening the global semiconductor shortage. Furthermore, since Russia and Ukraine are critical suppliers of neon gas and palladium, which are used to produce semiconductor chips, the war between the two countries could lead to further chip production disruptions worldwide. However, because the demand for semiconductors remains strong due to the rising adoption of advanced technologies and continuing digitization, and the industry is ramping up production with the help of government and private investments, companies in this space should benefit over the long run.
Investors’ interest in the semiconductor space is evident in the ProShares UltraShort Semiconductors ETF’s (SSG) 16.1% returns year-to-date versus the SPDR S&P 500 ETF Trust’s (SPY) 7.1% decline.
