SMH: Correction In Semiconductor Stocks Presents A Gift Not To Be Missed

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VanEck Semiconductor ETF fell into correction territory, stunning late investors who chased the AI FOMO.Earnings growth estimates for the semiconductor industry remain robust, lowering the chance of a...

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Missed\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-26 23:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4686557-smh-correction-in-semiconductor-stocks-presents-a-gift-not-to-be-missed><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>VanEck Semiconductor ETF fell into correction territory, stunning late investors who chased the AI FOMO.Earnings growth estimates for the semiconductor industry remain robust, lowering the chance of a...</p>\n\n<a href=\"https://seekingalpha.com/article/4686557-smh-correction-in-semiconductor-stocks-presents-a-gift-not-to-be-missed\">Source 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Ltd"},"translate_title":"SMH：半导体股票的调整是一份不容错过的礼物","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SPY":1,"NVDA":1,"QCOM":1,"LRCX":1,"QQQ":1,"MU":1,"SMH":1,"SPX.AU":1,"SPY.AU":1,"TSM":1,"AVGO":1,"ASML":1,"AMD.AU":1,"AMD":1,"AMAT":1,"TXN":1,"FDN":0.9,"OEF":0.6,"OEX":0.6,"SDS":0.6,"SH":0.6,"SPXU":0.6,"SSO":0.6,"UPRO":0.6,"03145":0.6,"03165":0.6,"ESmain":0.6,"IVV":0.6,".SPX":0.6},"content_text":"VanEck Semiconductor ETF fell into correction territory, stunning late investors who chased the AI FOMO.Earnings growth estimates for the semiconductor industry remain robust, lowering the chance of a debilitating bear market decline.SMH's leading companies are expected to continue riding the AI growth wave, underscoring robust buying sentiments.SMH's price action suggests buyers have returned this week, underpinning a possible bottom.Semiconductor investors waiting for an opportunity to pull the buy trigger shouldn't miss the gift presented.serg3d VanEck Semiconductor ETF Fell Into A Correction Late VanEck Semiconductor ETF (NASDAQ:SMH) investors received their moment of reckoning I believe they deserve, as SMH fell into correction territory (>15% decline) through last week's lows after topping out in March 2024. I have already turned cautious on several leading semiconductor companies within SMH's construct. I suspected the AI fervor was too fast, too furious as VanEck Semiconductor ETF led the S&P 500 (SPX) (SPY) from its October 2023 bottom.   SMH Top Holdings Exposure %   Nvidia (NVDA) 20.30   Taiwan Semiconductor Manufacturing (TSM) 12.60   Broadcom (AVGO) 7.85   ASML (ASML) 4.90   Texas Instruments (TXN) 4.73   Qualcomm (QCOM) 4.72   Micron (MU) 4.56   Applied Materials (AMAT) 4.48   Lam Research (LRCX) 4.44   Advanced Micro Devices (AMD) 3.95   Total exposure 71.5   Click to enlarge SMH top holdings. Data source: VanEck SMH is designed to replicate the performance of the MVIS US Listed Semiconductor 25 Index. As a result, the performance of the stock of the biggest companies (by market cap) in the semiconductor industry is expected to influence SMH's volatility. As seen above, the top ten holdings in SMH account for more than 70% of its exposure. As a result, semi-investors must be comfortable managing concentration risks as part of SMH's thematic investing portfolio construct. Data by YCharts Notwithstanding the caution, there's little doubt that SMH has outperformed the Nasdaq (QQQ) (NDX) over the past ten years, even though it suffered a battering in 2021-22. As seen above, SMH delivered a 5Y and 10Y total return of 29.5% and 26.2%, respectively. Data by YCharts Compared to the Nasdaq's 5Y and 10Y returns, SMH's outperformance has benefited long-term semi-investors who resolutely held on to their positions. In addition, Morningstar's data indicates an alpha of 15.51, corroborating its outperformance. Despite that, with SMH falling into a correction in April, bearish investors will likely question its ability to sustain its performance if its leading holdings exhibit further downside volatility. Semiconductor's Earnings Growth Estimates Are Robust Semiconductor forward earnings growth estimates (Yardeni Research) Such worries about another down-cycle aren't unjustified. As seen above, the semiconductor industry suffered a steep normalization phase as earnings growth turned negative (blue line) before bottoming out in late 2022. However, earnings growth estimates for the industry have continued to rise through 2025 before a deceleration is expected in 2026. Therefore, the threat of another steep downturn, as observed in 2022, seems less likely as companies continue to invest aggressively. NVDA forward earnings growth estimates (Seeking Alpha) It isn't rocket science to know by now that AI hype has driven significant increases in Nvidia's earnings growth estimates. With NVDA accounting for 20% of VanEck Semiconductor ETF's holdings, investors are urged to pay close attention to developments shaping the Jensen Huang-led company. SMH ETF Factor Grades (Seeking Alpha) Therefore, I assessed that SMH's fundamental thesis has remained highly robust, attracting solid buying sentiments (\"A+\" momentum grade). TSMC's recent Q1 earnings suggest that near-term uncertainties could persist as it downgraded its full-year semiconductor industry (ex-memory) outlook. However, I didn't assess red flags suggesting we could have a structural de-rating. ASML's Q1 earnings call underscores the confidence of a growth rebound for ASML in 2025. Accordingly, ASML is anticipating continued strong demand across the EUV and DUV space. As a result, ASML emphasized that \"the industry expects to be in the middle of a cyclical upturn in 2025.\" In addition, TSMC management highlighted the underlying strength of its customers' AI growth drivers. TSMC telegraphed \"insatiable AI-related demand.\" As a result, the leading pure-play foundry expects \"revenue contribution from several AI processors to more than double\" in 2024. Is SMH ETF A Buy, Sell, Or Hold? SMH price chart (weekly, medium-term, adjusted for dividends) (TradingView) SMH's price chart shows a clear medium-term uptrend bias with no signs of a flushed top, preceding a potential sell signal. Don't be alarmed by the top in March, as the SMH doesn't need to move up in a straight line (that's an unreasonable expectation). Last week's selloff digested nearly two months of gains, helping to level off some recent AI FOMO. I assessed two critical levels buyers must support to help maintain SMH's upward momentum. The first zone close to the $190 level was nearly re-tested. If dip-buyers can hold this level robustly, buying momentum should resume toward its March 2024 highs. However, a steeper pullback toward the $160 level cannot be ruled out, reflecting a more than 30% bear market decline. That would likely cause significant pain to recent buyers and incite deep fear. However, I view that level as unlikely for now, as we are likely still in the nascent phases of a multi-year AI chips spending growth cycle. With that in mind, a corrective pullback (and not a bear market one) seems the more likely scenario, suggesting we are close to a medium-term bottom. Rating: Initiate Buy. I Want To Hear From You Have constructive commentary to improve our thesis? Spotted a critical gap in our view? Saw something important that we didn't? Agree or disagree? Comment below with the aim of helping everyone in the community to learn better!  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2430204125"}