The VanEck Semiconductor ETF (SMH) has reached a 26-year high relative to the Nasdaq-100 (QQQ), a performance not seen since the dot-com bubble peak. While this comparison might suggest an impending crash, technical and fundamental analyses indicate a strong, sustainable secular bull trend for semiconductors. Key players like NVIDIA are showing explosive revenue growth and historically cheap valuations, suggesting this is a prime time for investment.
The semiconductor sector is exhibiting a performance not seen since the peak of the dot-com bubble, with the VanEck Semiconductor ETF (SMH) reaching a 26-year high relative to the Nasdaq-100 (QQQ). This surge, an all-time high dating back to May 2000, is drawing parallels to the tech bubble's end. However, experts argue that this time, the underlying fundamentals suggest a sustainable secular bull trend rather than an impending bubble burst.
The SMH's outperformance of the broader tech market is significant and is not indicative of a maturing trend on the verge of reversal. The article highlights that fundamental valuations within the semiconductor industry are far from being stretched to bubble-like proportions.
Semiconductors constitute approximately 30% of the Nasdaq-100 ETF (QQQ) and have been a major driving force not only since the March lows but also throughout the rally that began in 2015. Recent technical analysis reveals compelling patterns in the SMH's price action. The first major bullish wave from the 2020 lows saw a 232% rally at a 42-degree angle. The second wave, originating from post-2022 lows amid the AI buildout, achieved a 239% rally at a 41-degree angle. The current, third cyclical bull trend from early 2025 lows has advanced 207%, with projections indicating a potential 235% rally, pushing SMH towards a major decision zone around $571.
A key observation is the accelerating angle of ascent in the current trend, reaching 52 degrees. This acceleration suggests a strengthening secular bull trend rather than the exhaustion typical of mature cyclical trends. The author emphasizes a practical approach, combining technical analysis for timing and risk management with fundamental analysis for investment selection.
Examining NVIDIA (NVDA) as a key semiconductor player, the article points to its sideways price action since last year, hovering around the $200 mark. While price has consolidated, revenue growth has been astronomical. Analysts project NVDA's revenue to soar to hundreds of billions by 2026, a staggering increase from the twenty-something billion in revenue from 2021-2023. Despite its massive market capitalization (over $4 trillion), this growth rate is described as “downright shocking.”
Furthermore, NVDA's current forward valuation of 23.7 times earnings is highlighted as exceptionally low. With an expected 2026 EPS of $8.34, a 23 forward P/E is considered historically cheap, often seen after significant market sell-offs in 2019, 2022, and 2025. The current consolidation, coupled with this attractive valuation and robust revenue growth, mirrors these historical buying opportunities. The impending release of Blackwell, the development of Vera Rubin to counter Google's TPUs, and the SMH's lead in the broader market all suggest a strategic increase in semiconductor allocation is warranted.
The article concludes by reinforcing that while fundamentals identify what to invest in, technicals dictate when to invest, positioning the semiconductor sector for continued gains.
