Potential Intel Deal Boosts Chip ETFs

Merger Monday was back this week as a handful of mergers and acquisitions were announced. But, one deal that has not come to fruition yet involves the largest name in the semiconductor sector, Intel Corp INTC. The company has reportedly been in talks to buy a fellow chipmaker, Altera Corp ALTR in a deal that would total $10 billion and make it the single biggest purchase INTC has ever made. ALTR manufactures programmable chips, which are different than many of its competitor's chips. Programmable chips may be customized after they are purchased to suit a wide range of functions such as web search or updating social networks. The acquisition of ALTR would provide Intel with the diversity that CEO Brian Krzanich has been looking for, as the California-based chipmaker has been slow to adapt to the fast paced growth in smartphones over the last few years. Earlier this month INTC slashed $1 billion of its first quarter revenue forecast, cutting it down to $12.8 billion on slower than expected personal computer sales. The company has been under pressure to make a large acquisition following the NXP Semiconductors NXPI purchase of Freescale Semiconductor Holdings FSL earlier this month for $12 billion. Shares of ALTR jumped up 29 percent, while INTC shares jumped about 8 percent on Friday after news of the potential takeover hit the wires. Highlighted below are three ETFs that hold both ALTR and INTC in the top holdings. The Market Vectors Semiconductor ETF SMH tracks 26 of the largest U.S. listed semiconductor companies across four countries. The U.S. at 70 percent, and Taiwan at 15 percent make up the majority of the portfolio. The top individual holdings include INTC with a 17.4 percent holding, Taiwan Semiconductor Manufacturing Co TSM making up 15.5 percent, and Texas Instruments TXN coming in at 5.2 percent. SMH is up 23 percent over the last 12 months and up 9 percent over the last six months. Since stopping just above its 200-day moving average last week the ETF is up 4 percent. The ETF has an expense ratio of 0.35 percent. The SPDR S&P Semiconductor ETF XSD is made up of 48 companies in the semiconductor industry. The top individual holdings include ALTR with a 3.1 percent holding, Qorvo Inc QRVO making up 2.7 percent, and Skyworks Solutions Inc SWKS coming in at 2.6 percent. XSD is up 29 percent over the last 12 months and 21 percent over the last six months. The more diverse ETF has an expense ratio of 0.35 percent. The iShares PHLX Semiconductor ETF SOXX consists of 30 U.S. companies that design, manufacture, and distribute semiconductors. The top individual holdings include TXN with an 8 percent holding, Qualcomm Inc. QCOM making up 7.8 percent, and INTC totaling 7.7 percent. SOXX is up 19 percent over the last 12 months and up 9 percent over the last six months. The ETF has an expense ratio of 0.47 percent.