The recovery in the technology sector has been nothing short of remarkable, propelling various tech-focused exchange-traded funds (ETFs) to new heights. One such standout is the VanEck Semiconductor ETF (SMH:NSD), which has outperformed the widely popular Invesco QQQ Trust (QQQ:NSD) with an impressive year-to-date gain of 27.47%. Let’s dive deeper into the factors behind SMH’s success and explore its potential going forward.
The SMH ETF, which tracks the MVIS US Listed Semiconductor 25 Index, comprises companies involved in semiconductor production and equipment. Its recent performance has been bolstered by the remarkable resurgence of chip giants like Nvidia (NVDA:NSD) and Advanced Micro Devices (AMD:NSD).
Nvidia’s stock, for instance, has more than doubled this year, showcasing its robust growth in response to the surging demand for artificial intelligence (AI) applications. Following its stellar Q1 earnings beat and a promising outlook, NVDA stock surged by approximately 25% in after-hours trading. Similarly, AMD stock has experienced a remarkable uptrend, boasting a year-to-date gain of over 67%. Together, these two semiconductor leaders represent a significant 21.09% of SMH’s total holdings.
Over the past decade, the SMH ETF has delivered an average annualized return of 22% and witnessed a staggering 675.5% growth. By comparison, the broader market benchmarks such as the S&P 500 Index (SPX), QQQ, and NDX have recorded gains of nearly 149%, 395%, and 355%, respectively. These figures highlight the exceptional performance of SMH, solidifying its position as a strong investment contender within the tech sector.
Considering the current landscape, investors may be wondering about the price target for the SMH ETF. Based on the insights of 373 analysts, the 12-month average price target for the VanEck Semiconductor ETF stands at $148.56, suggesting a potential upside of 14.86%. With a consensus rating of Moderate Buy on TipRanks, 67.02% of analysts recommend buying SMH, while 28.95% suggest holding, and only 4.02% advise selling.
Additionally, the low expense ratio of 0.35% associated with the VanEck Semiconductor ETF further enhances its appeal as an investment option. Combining its attractive expense ratio with a notable Outperform Smart Score of eight, SMH emerges as a compelling choice for investors seeking exposure to the flourishing semiconductor industry.
While the recovery in tech stocks has certainly fueled the success of QQQ, it is important to recognize the impressive market performance of its competitor, the SMH ETF. With its substantial gains and optimistic price targets, SMH presents a compelling investment opportunity within the tech sector. As always, investors should conduct thorough research and consider their risk tolerance before making any investment decisions.