The semiconductor industry and the electric vehicle (EV) sector are two of the hottest investment themes in today’s market. Both are backed by long-term growth drivers—semiconductors power everything from AI to smartphones, while EV adoption accelerates with clean energy policies. But here’s the challenge: these sectors don’t always move in sync.
Smart investors use ETF rotation strategies to capture growth in one sector while reducing exposure in the other during downturns. This guide explains how to rotate between semiconductor ETFs and EV ETFs effectively.
Why Rotation Between Semiconductor and EV ETFs Matters
- Cyclical Performance
- Semiconductors rise in AI and consumer tech booms but suffer during inventory gluts.
- EVs rise with government subsidies and consumer adoption but can lag during commodity cost spikes.
- Complementary Growth
- Chips are the backbone of EV technology, but the timing of growth cycles differs.
- Risk Control
- Rotating between these ETFs prevents overexposure to one highly volatile sector.
👉 For industry forecasts, see Statista’s EV Market Outlook.
Best Semiconductor and EV ETFs
- Semiconductor ETFs:
- iShares Semiconductor ETF (SOXX)
- VanEck Semiconductor ETF (SMH)
- EV ETFs:
- Global X Autonomous & Electric Vehicles ETF (DRIV)
- KraneShares Electric Vehicles & Future Mobility ETF (KARS)
👉 For detailed ETF fund breakdowns, check ETF.com.
Smart Rotation Strategies
1. Economic Cycle Rotation
- During economic expansion: favor semiconductors (higher demand for chips in tech and AI).
- During energy transition policies: favor EV ETFs, which benefit from subsidies and consumer adoption.
2. Momentum-Based Rotation
- Track moving averages or RSI (Relative Strength Index).
- Switch exposure when one sector shows sustained momentum over the other.
3. Quarterly Rebalancing
- Adjust weights every quarter:
- Example: 60% semiconductors, 40% EVs in tech-heavy cycles.
- Reverse when EV adoption momentum is stronger.
Example Rotation Allocation
- 50% Semiconductor ETFs (SMH, SOXX)
- 30% EV ETFs (DRIV, KARS)
- 20% Defensive Assets (Dividend ETFs or Bonds)
This ensures exposure to both growth sectors without betting everything on one.
Risks to Watch
- Correlation Risk – Both sectors can fall simultaneously during recessions.
- Government Policy Shifts – EV subsidies or chip export bans can quickly shift performance.
- Overtrading – Too frequent rotations reduce gains due to transaction costs.
Conclusion
Rotating between semiconductor and EV ETFs is a strategic way to capture high growth without overloading on one volatile sector. By following cycles, using momentum signals, and rebalancing periodically, investors can smooth returns and seize opportunities from both industries.
This balanced approach ensures you’re ready whether AI chip demand surges or EV adoption accelerates.
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