Potential Intel Deal Boosts Chip ETFs

Merger Monday was back this week, as a handful of mergers and acquisitions were announced. However, one deal that has not come to fruition yet involves the largest name in the semiconductor sector, Intel Corporation (NASDAQ: INTC). The company has reportedly been in talks to buy a fellow chipmaker, Altera Corporation (NASDAQ: ALTR) in a deal that would total $10 billion and make it the single biggest purchase Intel has ever made.

Altera 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 Deal

The acquisition of Altera 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, Intel slashed $1 billion of its first-quarter revenue forecast, cutting it down to $12.8 billion on slower-than-expected personal computer sales.

Related Link: Citi Sees Buying Opportunities In Semiconductors, Despite FX Headwinds

The company has been under pressure to make a large acquisition following the NXP Semiconductors NV (NASDAQ: NXPI) purchase of Freescale Semiconductor Ltd (NYSE: FSL) earlier this month for $12 billion.

Shares of Altera jumped up 29 percent, while Intel shares jumped about 8 percent on Friday after news of the potential takeover hit the wires.

Highlighted below are three ETFs that hold both Altera and Intel in the top holdings.

Market Vectors Semiconductor EFT

The Market Vectors Semiconductor ETF (NYSE: 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:

• Intel, with a 17.4 percent holding
• Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE: TSM), making up 15.5 percent
• Texas Instruments Incorporated (NASDAQ: 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.

Related Link: Analyst: Intel-Altera Deal Would "Make A Lot Of Sense"

SPDR S&P Semiconductor ETF

The SPDR S&P Semiconductor ETF) (NYSE: XSD) is made up of 48 companies in the semiconductor industry.

The top individual holdings include:

• Altera, with a 3.1 percent holding
• Qorvo Inc (NASDAQ: QRVO), making up 2.7 percent
• Skyworks Solutions Inc (NASDAQ: 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.

iShares PHLX Semiconductor ETF

The iShares S&P NA Tec. Semi. Idx. Fd.(ETF) (NASDAQ: SOXX) consists of 30 U.S. companies that design, manufacture and distribute semiconductors.

The top individual holdings include:

• Texas Instruments Incorporated, with an 8 percent holding
• QUALCOMM, Inc. (NASDAQ: QCOM), making up 7.8 percent
• Intel, 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.