Seeking Alpha • Jul 07

The AI Data Center Blues

Summary The hyperscaler AI data center buildout is facing mounting ROI concerns, with capex exceeding $700B in FY2026 and surging debt and equity issuance. Escalating costs for GPUs, NAND, DRAM, and electricity are pressuring hyperscaler margins and delaying or canceling data center projects. OpenAI and Anthropic, key AI customers, are burning cash rapidly and may struggle to fund future compute commitments, risking delayed IPOs and market reactions. Recent underperformance in some major hyperscaler stocks signals market skepticism as the 'build it and they will come' thesis weakens. Read the full article on Seeking Alpha

Seeking Alpha • Mar 21

SMH: Rested And Ready To Go

Summary Semiconductor stocks have been under pressure but are consolidating, setting up for a potential uptrend resumption in 2025. SMH, a concentrated ETF with 25 semiconductor stocks, has outperformed peers over the last year. Strong earnings, particularly from NVDA, and ongoing demand for semiconductors support the investment thesis for SMH. SMH's consolidation and PE ratio contraction suggest a healthy rest, making it a "buy" for anticipated rally resumption later in 2025. Read the full article on Seeking Alpha

Seeking Alpha • Feb 14

SMH Vs. SOXX: Both Are Attractive But I Prefer SMH

Summary Since my last writings, I now see a more favorable return/risk profile from both SOXX and SMH. The companies in both funds play a foundational role to our tech future and are some of the more innovative companies. Yet, both funds now trade at large valuation discounts from the broader tech sector. I also believe the market misinterpreted the impacts from DeepSeek. The price pullbacks from this misinterpretation offer an entry point. I favor SMH more due to my personal preference for concentrationand my stronger bullish view towards its top holdings (NVDA and TSM). Read the full article on Seeking Alpha

Seeking Alpha • Feb 01

SMH: Don't Let This Buying Opportunity Go To Waste

Summary Semiconductor investors endured a rough week, as DeepSeek fears erupted on Monday, but the fallout seems to have been contained. Robust retail buying and solid market sentiments have helped to mitigate the selling pressure across the market. AI compute isn't going to fall off the cliff, as hyperscalers and big tech double down on their conviction. High dependence on AI has introduced risks, but its relatively attractive valuation has likely considered them. I argue why fears on semiconductor industry have been overstated, and a fantastic buying opportunity is knocking on the front door. Read the full article on Seeking Alpha

Seeking Alpha • Jan 14

SMH: My Take On A Top Rebound Play For 2025

Summary VanEck Semiconductor ETF has a 20% exposure to Nvidia, giving investors a front-row seat to arguably the leading AI semi stock in the market. The SMH ETF offers investors beyond just Nvidia, allowing a more diversified take into semiconductor growth opportunities through the decade. Top holdings like Nvidia, Broadcom, and TSMC are well-positioned to partake in the next growth phase, with semis leading the way. SMH's valuation isn't considered excessive, although the moment of reckoning sometime down the road cannot be ignored. I argue why I believe SMH ETF is one of my top picks to play the rebound theme in 2025 as its recovery gains momentum. Read the full article on Seeking Alpha

Seeking Alpha • Jan 04

SMH: DeepSeek V3 Exposes The Gen AI Bubble

Summary Chinese start-up DeepSeek trained and developed one of the most powerful AI models with inferior GPUs, for a very modest budget of less than $6M. This suggests that the Gen AI capex is likely to plummet as other companies follow the DeepSeek V3 innovation. SMH is heavily concentrated, with only 3 stocks accounting for 42% of the index, thus vulnerable for a sharp selloff as the Gen AI bubble continues to burst. Read the full article on Seeking Alpha

Seeking Alpha • Dec 17

SMH Is Now Consolidating (Technical Analysis, Upgrade)

Summary VanEck Semiconductor ETF's valuation has become more reasonable since my last writing due to price correction and profitability improvement. The ETF's P/E ratio has contracted to 39.2x (vs. 45x at my last writing), aligning more favorably with the broader tech sector's valuation. Technical trading patterns indicate a consolidation phase, reducing the risk profile compared to the previous overbought status. These changes have led to a rating upgrade to Hold from my earlier sell rating. Read the full article on Seeking Alpha

Seeking Alpha • Nov 17

VanEck Semiconductor ETF: In A Holding Pattern

Summary I rate the VanEck Semiconductor ETF (SMH) as a Hold due to concentration risk, high valuation, and technical analysis suggesting near-term downside momentum. SMH has a high P/E ratio of 60x, indicating stretched valuations, making it a poor capital allocation choice at this time. Geopolitical risks, including potential tariffs and tighter controls on semiconductor exports, could negatively impact SMH's holdings and profitability. Read the full article on Seeking Alpha

Seeking Alpha • Oct 15

SMH: Time To Double Down

Summary VanEck Semiconductor ETF's fundamentals remain strong, supported by Nvidia's resurgence and the AI growth thesis. The SMH ETF's leading stocks, including Nvidia, Intel, Broadcom, and AMD, are exposed to the secular AI growth inflection. SMH's valuation isn't expensive when adjusted for its growth prospects. I explain why SMH's recovery is underway, as it seeks to regain potential market outperformance. With SMH positioned well into 2025, I argue why investors should consider adding aggressively before it potentially surges toward its previous highs. Read the full article on Seeking Alpha

Seeking Alpha • Sep 26

SMH: The AI Buildout Is Broadening Out

Summary Semiconductor stocks have seen pullbacks, but AI growth remains strong; VanEck's SMH ETF has adjusted its composition to reflect this trend. SMH reduced Nvidia exposure, reallocating to AMD, aligning with the broadening demand for custom semiconductor solutions in AI and data centers. SMH remains the largest and most actively traded semiconductor ETF, offering superior returns and diversified exposure to top semiconductor companies. Despite Nvidia's recent issues, the semiconductor sector's robust outlook supports a Buy rating for SMH, with expected earnings growth and favorable seasonality. Read the full article on Seeking Alpha

Seeking Alpha • Aug 23

SMH: Extreme Concentration Makes It Unattractive

Summary VanEck Semiconductor ETF is the largest semiconductor ETF with an AUM of over $23b. In my view, the semiconductor sector is one of the most attractive to have exposure to. However, the exposure the ETF provides represents the sector poorly. As the ETF is highly concentrated into companies that are dependent on each other in a low-risk environment, I rate SMH a Sell. Read the full article on Seeking Alpha

Seeking Alpha • Jul 23

SMH: Time To Lock In Your Profit

Summary My last writing urged you to consider a more concentrated bet on the tech sector with SMH. Now, I urge you to consider the opposite: cash out and better diversify your tech exposure with other sectors or assets. The valuation discount I saw in SMH earlier has now been replaced by an oversized valuation premium. To add to my concern, SMH’s premium P/E is not supported by the underlying profitability metrics. Read the full article on Seeking Alpha

Seeking Alpha • Jul 02

SMH: The Gen AI Bubble Is Bursting, Semiconductors Already Past Their Peak

Summary The survey finds that "the financial benefits of implemented Gen AI projects have been dismal", 42% of companies have yet to see a "significant benefit from their generative AI initiatives". It seems like the Gen AI initiatives are very costly to implement, and on top of that, might not even work correctly (hallucinations concerns). The Semiconductors ETF SMH experienced a melt-up due to stock splits for Nvidia and Broadcom, but this bubble is likely in the process of bursting. Read the full article on Seeking Alpha

Seeking Alpha • Jun 17

SMH: Nvidia Is Not The Only Growth Story In This Picture

Summary Semiconductor stocks benefit from AI wave, boosted by large tech firms. Nvidia leads in the semiconductor market, but other companies like TSMC, Broadcom, and Qualcomm also have bright prospects. SMH ETF dominates peers in performance and assets managed, with potential for continued growth due to AI and data center infrastructure demand. Robust tailwinds demonstrated by capex booms and projected end user demand in technological devices propel the growth outlook for companies in the SMH fund. Read the full article on Seeking Alpha

Seeking Alpha • Apr 26

SMH: More AI-Related Catalysts Ahead, Buy The Dip

Summary VanEck Semiconductor ETF is a risky but potentially lucrative investment in semiconductor companies essential to the AI trend. SMH has a concentrated holdings structure, with Nvidia and Taiwan Semiconductor Manufacturing Company as the top holdings. Despite recent market corrections, the Fund should be considered a buying opportunity due to ongoing AI-related catalysts. Read the full article on Seeking Alpha

Seeking Alpha • Apr 02

Moving Out Of QQQ And Into SMH As Magnificent 7 Shrinks

Summary The stock prices of tech giants like Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia appreciated by an average of 111% in 2023. However, in 2024, these stocks are underperforming compared to their peers, with Apple, Tesla, Alphabet, and Microsoft lagging behind. Invesco QQQ Trust ETF has all seven of the Magnificent 7 companies within its Top 10 holdings. Investors looking for an alternative investment QQQ can consider VanEck Semiconductor ETF SMH, which continues to grow strongly in 2024. Read the full article on Seeking Alpha

Seeking Alpha • Mar 22

SMH: Clues From Chart Suggest Q2 Caution Despite AI Euphoria

Summary Nvidia is on track to achieve a record 11-week winning streak, driven by tech-investor enthusiasm and a red-hot AI thematic movement. But I spot risks on the chart of the VanEck Semiconductor ETF while it trades with a deserved valuation premium. April tends to be a weak month for the momentum factor and has given the SMH bulls fits in recent years. I highlight key price levels on the chart to monitor. Read the full article on Seeking Alpha

Seeking Alpha • Mar 16

High Risk-Reward: Deep-Dive Analysis Into The Volatile VanEck Semiconductor ETF

Summary VanEck Semiconductor ETF has generated truly outstanding returns for shareholders over the last five years. The fund's concentration in the semiconductor industry makes it a high-risk and volatile security, potentially unsuitable for most ETF investors. The fund's objective and asset selection process are well-defined, but its narrow focus limits the fund to investors purely seeking semiconductor industry exposure. VanEck's expertise in niche ETFs is combined with a great management team that instills confidence in the fund's operations. Hold rating issued due to real risk and downside potential. Read the full article on Seeking Alpha

Seeking Alpha • Feb 14

SMH: Benefitting From Specialized AI Chips Demand, But Is Also At Risk

Summary SMH offers targeted exposure to a basket of chip stocks. The industry is benefiting from the strong demand for specialized AI chips to handle data-intensive computations. Nearly a quarter of the fund exposure is in shares of Nvidia Corporation, which adds a layer of risk given the high concentration. Read the full article on Seeking Alpha

Seeking Alpha • Jan 10

SMH: You Need Exposure To The Vibrant And Lucrative Semiconductor Sector

Summary The VanEck Semiconductor ETF has been significantly outperforming the broad market indexes and has an average annual return of 24%+. Nvidia, the top holding in the SMH ETF with a 21% weight, is generating strong growth in revenue and free-cash-flow and is arguably not over-valued. Global semiconductor sales are projected to triple over the next decade. As a result, all investors need to have exposure to this dynamic and very lucrative sector. Read the full article on Seeking Alpha

Seeking Alpha • Oct 11

SMH Is An Exclusive Private Club Deserving A Contrarian View

Summary The 25 semiconductor companies held by SMH are industry leaders and play key roles in supporting other sectors of the economy like defense, automotive, telecommunications, and mobile devices. As such and going beyond monopolistic competition, SMH can be compared to an exclusive private club whose members are obtaining special attention from the authorities. The contrarian view is built using the notion that something which comes with exclusivity cannot be subject to the same market sentiment that is impacting others. A comparison of valuations with a defense sector play also helps in reinforcing the contrarian view. When looking for opportunities, patience is key for a good margin of safety. Tech stocks are having a rough time with the VanEck Semiconductor ETF (SMH) falling by more than 40% since the start of 2022 while the broader market tracking S&P 500 went down by less than 25% as shown in the chart below. Performance Comparison (www.seekingalpha.com) Except for some short-term bounces from time to time, the downside should continue well into 2023, unless the Federal Reserve suddenly moderates its hawkish instance on interest rates. Well, this is what most of us tend to think, but, it is precisely now that one has to be contrarian by going against the market sentiment and thinking about opportunities. For this purpose, I already wrote about how the CHIPS Act in a thesis on the iShares Semiconductor ETF (SOXX), and how chip equipment manufacturers will most likely be the short-term beneficiaries as foundry capacity is added frantically on American soil. To make the case for this contrarian thesis, I show how VanEck's holdings, when considered as a whole, operate as a private club, where a commodity, in this case, chips, is offered in limited supply. Normally, such a business model applies to exclusive golf clubs, but, makes sense for SMH's concentrated cocktail of 25 stocks, given their industry leadership positions, and the fact that they are being supported by favorable policy measures as well as the way the semis ecosystem has evolved. The Evolution of the Ecosystem First, the CHIPS Act is trying to reverse a trend that has been going on since the 1990s, namely outsourcing less profitable and capital-intensive manufacturing to East Asia. At that time, high Capex foundry businesses were not aligned with the profitability motives of corporate America prompting companies like Qualcomm (NASDAQ:QCOM), NVIDIA (NASDAQ:NVDA), and Advanced Micro Devices (NASDAQ:AMD) to outsource manufacturing to Taiwan Semiconductor Company (TSM). Subsequently, the financial results, namely the gross margins of the three fabless (without foundries) companies have beaten Intel's (NASDAQ:INTC), which opted to be an integrated device manufacturer ("IDM''), or one which does everything from designing chips to producing them in foundries. The outsourcing concept was so successful that even Intel entrusted the production of its most advanced 5nm chips to TSMC and South Korea's Samsung Electronics (SSNLF) which is not a member of SMH's exclusive private club as it is a conglomerate involved in many other sectors. Data by YCharts However, the era of cheap manufacturing abruptly came to an end in 2020-2021 as the pandemic disrupted supply chains, with the Ukrainian conflict exacerbating matters this year. As a result, costs went up with TSMC having to pass on these to its customers in turn bringing down their gross margins as of 2022. This decline is evidenced in the above charts, and, in a way, justifies the investment being made to boost home capacity as it shows that one cannot always take low-cost East Asian manufacturing for granted. Furthermore, Covid infection rates remain persistently high in China where a lot of the components used to manufacture electronic devices come from. Drastic lockdowns aimed at containing Covid spread have negatively impacted economic growth in that country, which consumed more than 50% of the world's chips in 2021. Volatility due to both Demand and Supply Chinese chip stocks are also suffering from volatility after the U.S. Department of Commerce's recent move to further restrict Lam Research (LRCX), KLA Corp (KLAC), Applied Materials (AMAT), Nvidia, and AMD, and others from exporting AI chips together with the equipment which can produce them to China. However, investigating deeper, these measures which seem more geared at restricting the use of semiconductors for military applications include a reprieve (does not apply to) foreign firms operating in that country. This reprieve could signify that U.S. semis will not face a sudden erosion of revenue from China and, to be frank, these restrictions have regularly been imposed since 2016 with the stocks also adversely impacted during periods of high geopolitical tensions. Additionally, volatility has gained the upper hand since August as seen in the above chart, following a worsening of the demand outlook for some like Micron (MU), with AMD and NVIDIA also having issued warnings earlier on due to the higher inflation eating into their customers' disposable income. Also, a bleak report by the SIA (Semiconductor Industry Association) stipulates that global sales for August, while growing slightly by 0.1% compared to the same period last year, were down by 3.4% with respect to July. The real cause for concern though was that the Americas region which comprises the U.S. (and generally viewed as being a more resilient country) was down by 2.8% or worse than Japan's 1.4% decline. The bright spot in this rather gloomy picture was Europe whose August sales progressed by 1.5% with respect to July. In this respect and as shown in the table below, VanEck's ETF includes European NXP (NXPI) and STMicroelectronics (STM) which are major designers and manufacturers of automotive and industrial chips. SMH's Holdings (www.vaneck.com) In addition to slowing demand concerns impacting investors' sentiment due to the cyclicality of the semis industry, there is also the quantitative tightening of monetary policy by the Fed. With liquidity being drained out of the monetary system and interest rates going higher, tech companies may find it harder to get their hands on the cash necessary to finance their growth. Normally, this is rhetoric put forward to justify why tech stocks are being punished by the market, but this may not apply to SMH. Getting Better with Competitors being Sidelined For this matter, VanEck's Index tracks the most liquid companies based on market capitalization and trading volume. These are profitable and have high levels of cash as shown in the table below. Therefore, if liquidity does not completely evaporate from the monetary system, they could resist the forthcoming period of economic gloom being forecasted by many as the Fed desperately battles high inflation. Data by YCharts In addition to financial strength, there are also other reasons which make them resilient. First, with more chips being used in cars and demand exceeding supply, they have the pricing power to pass on additional costs to customers in order to sustain their profitability and cash flows. Second, looking at the competition, the barriers to entry are high in this industry for any new entrants. For example, few have the financial capability to purchase ASML's (ASML) advanced EUV lithography machine priced at $200 million each. To this end, even New York-based GLOBALFOUNDRIES (GFS), which, by the way, does not figure in SMH's holdings, halted its plan to purchase them in 2018 and instead concentrate on more matured nodes. Third, China as a competitor is being sidelined just like Huawei was ousted from the telecommunications supply chain through export restrictions. Now, even if some foreign company wants to export chip-making gear to China, it would rapidly be tracked down by the U.S. authorities. For this matter, most European, Japanese, South Korean, and Taiwanese companies producing advanced gear make use of U.S. technology or patents somewhere in their value chain, which entitles the Department of Commerce to impose hefty fines in case of violations. In fact, the CHIPS Act has China so worried that it envisaged bringing matters to the World Trade Organization, possibly on competition grounds. Therefore, while SMH's holdings may face short-term pains, policy actions are being taken to strangle competitors in East Asia. Continuing on a positive note, some are also getting federal support to expand U.S. operations. Normally, when companies face hurdles in their supply chains, they have to fend for themselves and even change their operating models. This is not the case for SMH's fabless plays who are indirectly benefiting from taxpayers' money, all in the name of national security and competitiveness, while in fact, the ETF's holdings will benefit as well as the investors who invest in them. Concluding with the Private Club Rationale Along the same lines, their roles at the heart of the semiconductor ecosystem confer SMH's strong cocktail of semis exclusive rights just as the rich and powerful members of a private club. This is not a monopolistic competition when many companies offer competing products that are relatively similar, but not good substitutes. Instead, SMH's ecosystem consists of only 25 companies, and with ASML being the sole supplier for the leading edge process nodes, it means more or less standard designs for its customers. Also, the usage of software enables a higher degree of product substitution compared to a decade ago when it was all hardware based.

Seeking Alpha • Sep 12

SMH Vs. SPY: Time To Step Up From QQQ

Summary There are good reasons to consider betting heavier on tech now given its valuation correction recently compared to the overall market. Due to recent corrections, the VanEck Semiconductor ETF (SMH) is now trading at a 14% valuation discount to the SPDR S&P 500 Trust ETF - SPY. The valuation discount is even larger, about 30%, compared to the Invesco QQQ ETF. Such valuation contraction has created an interesting opportunity to consider heavier bets on the tech sector, i.e., even heavier than QQQ. Although, investors need to be aware of SMH’s risks too. For example, its higher turnover rates and foreign exposure may create some tax drag in non-exempt accounts. Thesis Recent price corrections have brought tech valuations to an attractive level. As an example, the VanEck Semiconductor ETF (NASDAQ:SMH) has historically been traded at a premium relative to the overall market. For example, when I wrote about SMH about 1 year ago back in July 2021, SMH was trading at a PE of about 32.9x. And the overall market, represented by the SPDR S&P 500 Trust ETF (NYSEARCA:SPY), was trading at a PE of about 26.6x. As a result, SMH was boasting a 24% premium over the overall market (which by itself was a lofty level already). Fast forward to now, recent corrections have brought SMH's PE to the current level of 17.5x, about a 14% discount from SPY’s 20.2x. To wit, SMH suffered a total loss of almost 30% YTD as you can see from the following chart, and SPY about 14%. To add another reference point, the NASDAQ 100 index, represented by the Invesco QQQ ETF (QQQ), suffered a total loss of 22%. Combined with earnings changes, the PE of SMH now stands at an even larger discount from QQQ (about 25.0x) by a discount of ~30%. Against this background, the thesis of this article is that such valuation corrections have created an interesting opportunity to consider heavier bets on the tech sector, meaning even heavier than QQQ. Most investors are familiar with the use of QQQ to gain exposure to the tech sector. And as will be elaborated later, QQQ indeed provides a heavier exposure to tech than SPY. However, QQQ itself isn't a tech play per se considering that less than 50% of its assets (i.e., a minor majority) are invested in information technology stocks. On the other hand, QQQ is still trading at a sizable PE premium over the S&P 500 (by about 23%). Given the above developments, we will examine the case for SMH through a comparative analysis against SPY more closely next. Source: Seeking Alpha SMH vs SPY: basic information SPY needs little introduction. It is one of the most popular funds tracking the S&P 500 Index. SMH, in contrast, is a pure tech play completely concentrated in the semiconductor sector. As detailed in the fund description: VanEck Semiconductor ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVISUS Listed Semiconductor 25 Index (MVSMHTR), which is intended to track the overall performance of companies involved in semiconductor production and equipment. As you can see from the following chart, SMH is a much smaller fund than SPY, with $6.49B of AUM compared to SPY’s enormous $360B. SMH also charges a higher fee of 0.35% compared to SPY’s 0.09%. Finally, SMH holds a much more concentrated portfolio with only 26 stocks (compared to SPY’s ~500 holdings), and we will revisit the implication of such concentration risks as we go. Source: ETF.com SMH vs SPY: Past performance and risks Both the SMH and SPY funds have delivered handsome returns in the past as you can see from the chart below. Since the 2008 financial crisis (which I consider to be the endpoint of the last business cycle and the beginning of a new one), SMH has delivered an annual return of 14.8%. And SPY has delivered a CAGR of 9.12%, a solid return by any measure, however, nowhere near the SMH. SMH even outperformed QQQ by a good margin of about 1.1% of alpha per year as seen. The reason is that QQQ is not a pure-tech play because the NASDAQ 100 index tracks the largest NON-FINANCIAL companies listed on the Nasdaq. Many of these companies are not tech companies and I will elaborate on this point later. When compounded over the years, the above outperformance has accumulated into a sizable difference in total return. With dividends reinvested, SMH has delivered a total return of 758%, beating QQQ’s 663% by 95% and SPY’s 360% by 398% (i.e., more than doubling it). Although, the downside is the price volatilities due to the concentration risks aforementioned and also the highly cyclical nature of the semiconductor sector. We’ve already seen a glimpse of the price volatility in the YTD performance with SMH suffering a correction that is more than twice that of SPY and about 1/3 more than QQQ. In the long term, SMH has also suffered much larger volatility. As you can see from the following chart, in terms of standard deviation, SMH's 14.8% is 1.62x higher than that of the S&P 500 (9.12%) and has also been higher than QQQ by about a 1.1%. In terms of worst-year performance, SMH suffered a 45% loss (which will take more than a 81% rally to break even), which was 4% more than QQQ and 9% more than the S&P 500. And finally, in terms of maximum drawdown, SMH’s 49.5% maximum drawdown (which takes an almost 100% rally to break even) is truly nerve-wracking. And next, we will examine the root cause of the volatilities more closely. Source: Portfolio Visualizer SMH: More concentrated bet on Tech than SPY and QQQ As aforementioned, SPY tracks the large 500 companies in the U.S., QQQ tracks the largest NON-FINANCIAL companies listed on the Nasdaq, and SMH is concentrated in the semiconductor sector. The chart below provides more specifics to compare their exposures. SMH’s exposure is effectively 100% concentrated in the information technology sector. In contrast, information technology represents 26.8% of SPY’s total assets and 49.8% of QQQ’s total assets. So as mentioned above, many investors are familiar with the use of QQQ to gain exposure to the tech sector compared to SPY. And QQQ indeed provides the heavier bet that investors seek: its exposure to infotech is almost 2x higher than SPY. However, infotech is only a minor majority for QQQ, and QQQ still holds a large portion of “non-tech” stocks such as consumer staples, healthcare, industrials, and utilities. Source: Author based on fund issuers' data SMH, in contrast, is a pure tech play. The fund is completely invested in the tech sector, especially the semiconductor sector. You can also see the concentration and composition more vividly by looking at their top ten holdings. Note that among these three funds, only one holding overlaps: Nvidia (NVDA). But NVDA represents the second largest holding in SMH (with a 7.58% allocation). In contrast, it only represents the 10th largest holding in SPY (with only about 1.37% allocation) and the 7th largest holding in QQQ (with only about 3.2% allocation). Also note that both SPY and QQQ’s top 10 holdings include staples like Johnson & Johnson (JNJ), Costco (COST), and PepsiCo (PEP), while all SMH holdings are semiconductor stocks. To me, this is key for SMH’s long-term performance. It places a concentrated bet on one of the most innovative sectors: information technologies. For this reason and the current valuation, I see favorable odds for SMH to keep outperforming both the S&P 500 and also QQQ in the long term, as to be detailed next.

Seeking Alpha • Jul 21

Use Sumco To Predict Performance Of Semiconductor ETF SMH

Semiconductors remain volatile due to investor sentiment, rather than underlying growth. ETFs like SMH offer safer exposure to the industry, but where should an investor look to understand the industry’s potential? I propose following the performance of Sumco, the leading supplier of silicon wafers to foundries worldwide. Introduction Using an ETF such as the VanEck Vectors Semiconductor ETF (SMH) is a safe way for part-time individual investors to gain exposure to this incredibly important industry. I personally believe that SMH is the best ETF compared to the iShares Semi (SOXX) and SPDR Semi (XSD) due to a favorable expense ratio and exposure to ADRs of foreign leaders Taiwan Semi (TSM) and ASML (ASML). Although, there is little difference between the collection (as shown in the chart below), and this article can apply to any industry ETF. I hope to provide insight on how to take advantage of this rapidly growing sector by looking at supply fundamentals. Koyfin For passive investors, it may be difficult to understand the fundamental performance of the industry without performing extensive research on the multiple top holdings. Instead, look to the foundation of the industry in the manufacture and sale of raw silicon wafers. This will help to maintain the right expectations, even as the market may seem to expect otherwise. Enter Sumco (SUOPY), one of the world’s major silicon wafer suppliers. This article will showcase how to read Sumco’s financials to determine the health of the semiconductor industry. Why Sumco? Well, I will let the Japan Times set the narrative: Sumco Corp., a key supplier of silicon wafers for the semiconductor industry, said it has already sold out its production capacity through 2026, a sign shortages in the industry may not abate for years. The Japanese company, one of a handful to provide the specialized silicon slabs that chipmakers use to create their designs, has orders to cover all output of its 300 mm wafers for the next five years, it said after reporting earnings on Wednesday. It is not taking such long-term orders for 150 mm and 200 mm wafers, but demand is likely to keep surpassing supply for years to come, the company said. The price of wafers rose by 10% in 2021 over the previous year and Sumco expects to see increases continue until at least 2024. That’s right, Sumco has sold out their production capacity until 2026 thanks to long-term contracts with clients. Who are these clients? Well, they include all top ten foundries in the world: Samsung (SSNLF), Intel (INTC), TSMC, SK Hynix, Micron (MU), Texas Instruments (TXN), Infineon (IFNNY), ST Micro (STM), Kioxia, NXP (NXPI), and more. Notice something? Most of these companies are in the top 10 holdings of semi industry ETFs as well. Considering Sumco is backed up until 2026, I would say the industry is quite healthy at the moment. However, as I will discuss next, investor sentiment may be the issue at heart. Sumco Sumco Other reasons why Sumco is a great indicator of industry success is their exposure to the latest technological advancements, rather than cheaper commodity chips. In fact, Sumco is the leader in advanced chips for applications in computing, CMOS (imaging for cameras, etc.), and even power semis (solar panels). Sumco is extremely focused on supplying the leading semis, but this works to our advantage. Thankfully, Sumco’s leadership has produced an extremely favorable financial situation thanks to high revenue growth, improved profitability, and a healthy balance sheet. Also, as sales are geographically diversified, as shown below, there is little financial risk to worry about that may cloud our entire industry outlook analysis. As the Japan Credit Rating Agency puts it: The semiconductor market remains favorable against a background of changes in social environment and expansion of demand base. Supply and demand for wafers has also been on a tight trend, and it is highly likely that these conditions will continue for the time being. In making its decision to expand its facilities, it is considered that the Company has concluded long-term agreements with large customers for longer periods than in the past, which will continuously improve its ability to generate cash flow. As the semiconductor market is expected to expand over the long term, the Company is more likely to be able to maintain a strong presence in the industry, while fulfilling its responsibility to supply wafers. JCR also believes that the Company will be able to maintain a sound financial position even as it makes large-scale growth investments through public offering. Sumco How to Determine Outlook To understand the future, we must understand the past. While historical performance is no indicator of future performance, I will begin by looking backwards to find patterns that we can follow. By comparing Sumco’s quarterly revenues and SMH’s total return over the past 10 years, I noticed three major patterns. First, a period of consolidation from 2013 to 2017 where both Sumco and SMH see mild growth, shown in gray. Second, a period of overexuberance followed by a significant decline. Interestingly, the worst total return performance was seen as Sumco reached a peak in revenues. Third, the current extreme volatility event as SMH has fallen 25%+ while Sumco has yet to find a peak in revenues. Tying together all three patterns is strong underlying organic growth (green arrow). Both Sumco and SMH have risen steadily over the past 10 years, spurred on by digitization across every aspect of our society. In the past, periods of consolidation were brought on by holding patterns in demand, as evident with flat revenue growth. Then, quick bullish cycles in the semi industry lead to significant outperformance for a year or so. I would recommend being aware of these patterns, as investors can take advantage and maneuver their holdings accordingly. The first takeaway would be to be aware of overoptimism and trim your holdings in a semi industry ETF as Sumco reaches a peak in revenues. Then, when industry sentiment creates a disconnect between revenue performance and valuation, begin adding back to your position. Koyfin This brings us to 2022, where semi industry valuations have fallen to decade low levels off the back of incredible performance in 2020 and 2021. While Sumco has yet to reach a peak in revenues (meaning they are still selling wafers), investors across the industry remain bearish on growth. SMH has fallen 27% from the peak in late 2021, while the cycle in 2018/2019 only saw a decline of ~24%. Also to note is that the trough in SMH share price occurs shortly after the peak in revenues, usually less than a year. This is why I believe that SMH’s current trading level offers another similar opportunity to 2019.

Seeking Alpha • Jun 07

The SMH ETF: Why I Am Still Long Semiconductors

Most of my followers know I am a long-term bull when it comes to the semiconductor sector. That is because I believe the sector is no longer the super-cyclical sector it was when it was largely dependent only on the PC and auto industries. Today, there are a plethora of vital & fast-growing tech sub-sectors that depend on semis: data center, EVs, high-speed networking, crypto, gaming, smartphones, and AI/ML just to name a few.

Seeking Alpha • Apr 04

SMH: Why I Think History Says Semiconductors Are A Sell

Semiconductors are without question the "new oil", but that does not mean they will produce positive returns for investors in the future. Historically, semiconductor stock performance is more closely tied to macro conditions (for example, S&P 500 earnings and commodity inflation) than intrinsic growth. There is a correlation between computer investment as a percentage of GDP and semiconductor returns, but it is not clear that it is predictive. For semiconductor returns to remain positive, commodity inflation will likely have to get below S&P 500 earnings growth. We have experienced a massive technological supercycle and historically, these supercycles (as with oil) have been followed by relentless bear markets.

Seeking Alpha • Feb 09

SMH: Simple Way To Invest In This Secularly Growing Industry

Recent drawdowns in SMH have created long-term buying opportunities for investors in my opinion. I believe demand drivers including 5G, artificial intelligence, autonomous vehicles, and the internet of things will fuel semiconductor growth. Following the chip shortage, demand and excess investment will continue to drive secular growth in my opinion. SMH allows investors to potentially profit off this secularly growing industry.

Seeking Alpha • Feb 03

SMH Semiconductor ETF: Lessons Learned From Trading Volatility

SMH's implied volatility is trading above its annual mean. Although we are bullish in SMH long term, we are looking at selling this near-term "fear". We need to invest 90% of the devoted time into the trade's preparation and 10% to its execution and management.

Seeking Alpha • Nov 18

SMH: Why Semiconductors Are A Must Own

Global semiconductor sales for the month of September were $48.3 billion - up a whopping 27.6% yoy. Sales were strong across all geographic regions and across multiple markets. Global semiconductor demand still outstrips supply and has led companies like TSMC to announce price increases going forward. Bottom line: semiconductor demand is booming for EVs, networking, data centers, IoT, smartphones, 5G infrastructure, HPC, and many other tech sub-sectors. You need to own them.

Seeking Alpha • Sep 08

SMH: Exposure To TSMC Is A Positive In Face Of Supply Crunch

Just assuming that the VanEck Vectors Semiconductor ETF should continue to deliver upbeat performance does not make sense in context of the supply crunch. An analysis of the risks reveal that, despite some initial setback at the start of the pandemic, Taiwan Semiconductor Manufacturing seems to be profiting, not only from COVID-led demand, but also from geo-politics. With expansion into the U.S. and presence in China, TSMC's dominance looks set to continue. After an upbeat year-to-date performance of 25%, SMH's share trajectory should be more volatile towards the end of this year due to some uncertainty as to economic growth. There should be more upside in 2022, based on global semiconductor sales expectations, but it is TSMC which should ultimately clinch it for SMH.

Seeking Alpha • Jul 13

SMH: A Concentrated Cocktail, With Lower Volatility

Semiconductors' use is on the rise. SMH enables investors to benefit from the growth of semiconductor companies. Compared to SOXX, it offers better performance and lower volatility. There is still room for some more upside left.

Capital Markets earnings growth	12.3%
Revenue growth rate	n/a
Future return on equity	n/a
Analyst coverage	None
Last updated	n/a

Data	Last Updated (UTC time)
Company Analysis	2026/07/09 16:43
End of Day Share Price	2026/07/09 00:00
Earnings	N/A
Annual Earnings	N/A

Package	Data	Timeframe	Example US Source ^*
Company Financials	10 years	Income statement Cash flow statement Balance sheet	SEC Form 10-K SEC Form 10-Q
Analyst Consensus Estimates	+3 years	Forecast financials Analyst price targets	Analyst Research Reports Blue Matrix
Market Prices	30 years	Stock prices Dividends, Splits and Actions	ICE Market Data SEC Form S-1
Ownership	10 years	Top shareholders Insider trading	SEC Form 4 SEC Form 13D
Management	10 years	Leadership team Board of directors	SEC Form 10-K SEC Form DEF 14A
Key Developments	10 years	Company announcements	SEC Form 8-K

VanEck ETF Trust - VanEck Semiconductor ETF Future Growth

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