VanEck Semiconductor ETF and Nasdaq Comparison
It’s interesting to see how well the VanEck Semiconductor ETF (SMH) has performed compared to the Nasdaq’s recent recovery from its lows in late March. The ratio chart between SMH and the QQQ has reached a level not seen in 26 years, marking an all-time high from May 2000, just after the peak of the tech bubble. This situation is worth contemplating. The last time we witnessed such a significant outperformance from semiconductors relative to the Nasdaq 100 was during the dot-com bubble. But I’m not predicting a bubble burst here; rather, I’m curious about what might happen next.
When looking at broader technology trades, SMH seems poised to achieve new highs, though this isn’t typically where trends end. It’s important to note that leading semiconductor companies aren’t showing valuation signs that suggest a bubble. They account for about 30% of the Nasdaq-100 ETF QQQ and have been crucial not just since March but since the bull market started in 2015.
If we examine SMH’s weekly chart from 2018, several patterns emerge that might seem too good to be true—but they aren’t. The first bullish wave from the 2020 low reached a 42-degree angle with a rebound of 232%. The second wave, ignited by the post-2022 AI surge, delivered a 239% rally at a slightly steeper angle of 41 degrees. These numbers make me wonder where we’re headed next.
Fast forward to now, and we’re in what appears to be a third cyclical bullish wave, already 207% above early 2025 lows. If we aim for another 235% upside, SMH could hit around $571, which would be a critical zone. If we break through it, the previous patterns suggest a shift in trends, indicating we’re in a more extended bullish phase.
There’s additional support for this long-term trend idea as we’ve been tracking at a 52-degree angle, suggesting continuous acceleration. These aren’t typical market behaviors seen when trends are about to reverse. I get that all this technical jargon might sound overwhelming, but many investors rely on logical analysis to assess where companies fit into the market cycle. Fundamentals show what stocks might be good investments, but they don’t help with timing or managing risks—that’s where technical analysis comes in.
Let’s highlight the convergence of technical analysis and fundamentals. The dynamics at play are complex, which is why I encourage you to engage with this analysis regularly for insider insights into the market’s technical and fundamental landscape. Some investors lean towards technical analysis while others prefer fundamentals, but I believe there’s a middle ground. It’s a technical approach interlaced with fundamental analysis.
On the top panel of our analysis, we see price activity alone. NVIDIA (NVDA) has mostly remained flat for about a year, testing the key $200 mark. Below, annual revenue figures and year-over-year growth are laid out. From 2021 to 2023, NVDA recorded revenue of $20 billion, with analysts predicting a staggering $200 billion in three years. The year-over-year growth rate is notable.
Currently, NVDA’s forward valuation stands at an earnings ratio of 23.7x, with an expected EPS of $8.34 by 2026. Looking at the historical technical metrics for this forward PE shows it resting at a support level—essentially, it appears undervalued. Notably, the forecast of 23X is appealing. Many investors see significant returns following market downturns, as noted in years like 2019, 2022, and 2025. The standout year, 2024, saw sales surge from $26 billion to $60 billion within just a year, stabilizing prices thereafter. The current setup mirrors that cheap future valuation.
With upcoming developments like Blackwell’s shipping and Vera Rubin’s plans to challenge Google’s recent TPU advancements, we believe the semiconductor sector will gain traction. Our intention is to amplify semiconductor investments in our portfolio. As I see it, the fundamentals guide what to invest in while the technicals tell when to make those investments.
