SMH: More Of A Pullback Is Warranted Before It Is A Buy

Summary

• SMH's painful pullback in July/ August 2024 has occurred as expected, with the ETF nearly losing a quarter of its value then.
• Even so, the durability of generative AI demand across AI accelerators/ SaaS remains undisputed - as similarly reported by numerous market leading players.
• With the stock market entering the Q3'24 season, readers may expect more volatility as AMD continues to be downgraded and NVDA faces tougher YoY comparisons.
• With SMH also boasting an elevated TTM P/E valuations compared to historical trends and its peers, we believe that the ETF may offer a potentially lower return profile here.
• Interested readers may want to observe the market development, ongoing trade war, and the US elections for a little longer, while waiting for a more attractive entry point to materialize.

Klaus Vedfelt/DigitalVision via Getty Images

SMH Appears To Be Over Valued At Current Levels - Worsened By The Uncertainty Entering The Q3'24 Earning Season

We previously covered VanEck Semiconductor ETF (NASDAQ:SMH) in July 2024, discussing the robust generative

Analyst’s Disclosure: I/we have a beneficial long position in the shares of NVDA, ASML, TSM, AVGO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The analysis is provided exclusively for informational purposes and should not be considered professional investment advice. Before investing, please conduct personal in-depth research and utmost due diligence, as there are many risks associated with the trade, including capital loss.