What An INTC Pullback Costs Your ETFs

Your diversified semiconductor fund may be leaning more heavily on this one chipmaker’s sharp run-up than you realize.

The First Trust Nasdaq Semiconductor ETF (FTXL) holds about 12% of its assets in a single stock: Intel (INTC). If you own that fund, or one of the many others like it, you have a concentrated position in the chipmaker that you never directly chose. After a powerful run, it is worth taking a moment to see just how much of your portfolio’s performance is quietly tied to this one name.

How Stretched Has The Stock Become?

Intel’s stock has delivered a +356% return over the past year, with a +61% gain in just the last three months. That performance has pushed its price to a point about 63% above its own 200-day moving average, a simple measure of its long-term trend. Investors are pricing in high expectations, with the stock trading at about 97 times its expected earnings for the year ahead, supported by forecasts that see profits grow about 51% a year.

Which Of Your Funds Are Riding It?

This single stock is a holding in 59 different equity funds in our universe. The concentration is most pronounced in semiconductor-focused ETFs, which rode the gains up. The First Trust Nasdaq Semiconductor ETF (FTXL) holds about 12% of its portfolio in INTC and returned +144% over the past year. The iShares Semiconductor ETF (SOXX) is another popular fund carrying a significant position, with INTC at about 5.3% of its assets, and it returned +125% over the same period. The very concentration that fueled these returns is the same concentration that now represents single-stock risk.

What A Pullback Would Actually Cost You

This is not a prediction, but a simple scenario. If Intel’s stock were to simply revert to its 200-day average, it would drop about 39% from its current price. For the funds holding it, the math is direct. That 39% drop in INTC would translate to a loss of about 4.4% for the First Trust Nasdaq Semiconductor ETF (FTXL) from this one holding alone. For the iShares Semiconductor ETF (SOXX), the loss would be about 2.0%. This exposure is also sticky. You cannot surgically sell just the Intel shares inside your ETF. To reduce your position, you would have to sell the entire fund, potentially creating a taxable capital gain and making the risk harder to manage.

An Alternative To Consider

If you want to maintain exposure to the semiconductor theme with less weight on this one name, there are other options. The State Street SPDR S&P Semiconductor ETF (XSD), for example, holds INTC at about 2.4% of the fund. Its performance has also been strong, with a return of +96% over the past year. That is less than FTXL’s +144% return, but it comes with far less concentration in a single stock. For more on the dynamics behind the stock’s recent rally, it is worth considering the company’s turnaround efforts. The point is not to call a top but to be aware of the bets you are making, even the ones you made by accident.

How Do You Find A Better-Balanced Fund?

Whether this is a name you are happy to keep riding or one you would rather not own quite so much of, the first move is the same: see your true exposure to it, then find funds that carry the same theme with less of any single stock. A fund’s name tells you almost nothing about how concentrated it has quietly become.

Our ETF Valuation and Performance Scorecard ranks the major ETFs side by side on valuation, return, and risk, so you can see which funds lean hardest on a handful of names and which spread the exposure while keeping the performance.

A Fund Is Only Part Of Your Portfolio, Check The Rest

A fund is just one piece of what you own, and the same scrutiny applies to every other position in your portfolio. How much damage any single position could do to your net worth is a question with a precise answer. The Trefis Wealth team computes it for investors professionally, with the same rules-based systematic discipline that runs our high-quality portfolio. Request a free vulnerability audit of your biggest positions.