Chips Rebooted: SMH Surges On Trade Truce, Bullish Setup Signals More Upside

2025-05-13 12:26:58 ET

Summary

• VanEck Semiconductor ETF has surged 24% since early April, driven by positive momentum in the semiconductor sector and favorable U.S.-China trade developments.
• SMH offers concentrated exposure to 25 top U.S.-listed chip companies, with heavyweights Nvidia, TSM, and Broadcom comprising over 40% of the portfolio.
• Despite its recent gains, SMH trades at a high valuation of 35 times forward earnings, reflecting its growth potential but also limited margin for error.
• The 90-day U.S.-China tariff rollback presents a strong near-term catalyst, though the ETF's heavy tilt toward Nvidia and TSM adds volatility and speculative risk.

The VanEck Semiconductor ETF ( SMH ) has ebbed and flowed over the past several months, but since early April, it has mounted a strong comeback. After bottoming out early last month, the stock has surged over 24%, reigniting momentum across the subdued chip space. However, despite its recent gains, the broader narrative around the semiconductor industry remains mostly choppy. Additionally, SMH trades at more than 35 times forward earnings, which effectively sits close to the top of its historical band, offering limited margin for disappointment. However, the surprise de-escalation in the ongoing U.S.-China trade war this weekend injects fresh fuel into a potential sustained rally ahead. On top of that, it sits on a compelling mix of long-term secular tailwinds in AI, 5G, and EVs, among others, that continue pushing its long-term narrative....

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