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Summary

• SMH is upgraded to a Buy, thanks to the durable multi-year AI spending trends through 2030, with the ETF providing diversified exposure and reduced volatility amid sector uncertainty.
• Micron and Advanced Micro Devices are likely to lead early 2026 gains, supported by the insatiable hyperscaler demand for memory (DRAM/HBM) and the new PC refresh cycle/growing strategic partnerships.
• Nvidia’s China chip sales from February 2026 onwards and Vera Rubin’s launch in H2’26 are likely to offer additional upside potential, beyond AVGO’s growing custom chip backlog.
• These reasons are also why SMH’s premium valuation at P/E 44.93x is well justified, albeit warranting a moderate patience and a dip nearer $325s for an improved margin of safety.
• Combined with the recent breakout from the sideways trading cadence in Q4’25, 2026 may bring forth an outsized performance for many of the ETF’s holdings and SMH alike.

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I previously covered VanEck Semiconductor ETF (SMH) in October 2025, discussing how the ETF had been well buoyed by the ongoing AI boom, the billion-dollar investments, and the insatiable demand for AI chips/SaaS across numerous monetization

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**Analyst’s Disclosure:**I/we have a beneficial long position in the shares of SMH, NVDA, AVGO, MU, GOOG, AMZN, META 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.

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