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M&A Activity Lifts Semiconductor Stocks

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Technology stocks within the S&P 500 have been top performers year-to-date and are getting another lift from merger activity in the semiconductor space.

According to FactSet, the industry sectors that experienced the biggest increase in M&A deal activity for the three-month period from February to April of this year relative to the same period the previous year was technology services (519 vs. 440). And no sector within tech has been more active than semiconductors.

Sparking the deal activity among semiconductor stocks was chipmaker Avago’s $37 billion purchase of Broadcom in May, the largest ever in the semiconductor field. The Broadcom deal was subsequently followed by an impressive $16.7 billion acquisition of Altera by Intel.

Speculation about which semiconductor companies will be acquired next is driving share prices higher.

The SPDR S&P Semiconductor ETF (XSD) has gained 15.28% through the first six-months of the year, compared to just a 3.56% gain for the S&P 500 and 5.61% gain for the Technology Sector SPDR ETF (XLK).

Among XSD’s top holdings are Altera, Analog Devices, Intel, Silicon Laboratories and Xilinx. The fund has $215 million in assets and charges annual expenses of 0.35%.