Latest developments
SMH, the VanEck Semiconductor ETF, fell 2.3% on Tuesday, marking a continuation of a slump that began in May 2025. The decline follows a broader trend of falling semiconductor shares, as noted in a Seeking Alpha analysis that highlighted the sector's longest losing streak in nearly a year.
The ETF hovered near €100 in European markets, a level that reflects the optimism surrounding TSMC's recent earnings report. Despite the company's strong quarter, analysts point to a puzzling gap between its revenue growth and the revenue figures reported by OpenAI, raising questions about demand for advanced chips.
Kalkine Media reported that chip stocks have begun to rattle the VanEck Semiconductor ETF, with several constituent companies posting weaker-than-expected results. The volatility has prompted investors to reassess exposure to the sector.
Industry analysts say the prolonged downturn is driven by a combination of supply chain constraints, shifting demand in consumer electronics, and a slowdown in automotive semiconductor orders. The combination of these factors has pushed the sector into a negative cycle that has lasted for several months.
Trading volume for SMH spiked to over 12 million shares on the day of the decline, indicating heightened activity among both retail and institutional participants. The surge in volume suggests that investors are actively reallocating portfolios in response to the sector's performance.
Why it matters
SMH is a popular vehicle for investors seeking exposure to the semiconductor industry, and its decline signals a shift in sentiment that could affect the broader technology sector. A drop in the ETF may lead to reduced capital inflows into chip manufacturers and related supply chain firms.
The semiconductor industry underpins a wide range of products, from smartphones to electric vehicles. A sustained downturn could slow the rollout of new technologies and delay production schedules for companies that rely on advanced chips.
While the current trend is negative, analysts note that the sector has historically rebounded after periods of contraction. Investors may view the decline as a buying opportunity if they believe the fundamentals remain strong.
Background
The VanEck Semiconductor ETF was launched in 2012 and tracks the performance of companies involved in the design, manufacture, and distribution of semiconductor equipment and components. It has become a benchmark for investors monitoring the industry.
Semiconductor markets are known for their cyclical nature, with periods of rapid growth followed by corrections. The last major downturn began in 2020, driven by the pandemic and a surge in demand for data center equipment, and the sector has since recovered.
TSMC, the world's largest dedicated independent semiconductor foundry, reported a blowout quarter that raised expectations for the industry. However, the company's revenue growth has not fully translated into higher earnings for the sector, partly due to OpenAI's high demand for AI chips that has not yet materialised in the same way.
What happens next
Investors will be watching upcoming earnings releases from key semiconductor players, including TSMC, Intel, and NVIDIA, for clues about demand trends. Analysts are also monitoring policy developments that could affect supply chain logistics and component pricing.
If the sector can resolve supply constraints and secure new orders, a rebound could begin. Otherwise, the downturn may persist, prompting further adjustments in portfolio allocations.
Summary
- SMH fell 2.3%, continuing a slump that began in May 2025. - The ETF hovered near €100 amid TSMC’s strong quarter and OpenAI revenue uncertainty. - Chip stocks are rattling the ETF, increasing volatility and trading volume. - The semiconductor downturn is driven by supply chain limits, demand shifts, and automotive slowdowns. - Investors will monitor upcoming earnings and policy changes for signs of recovery.
Related headlines (third-party)
- Seeking Alpha: Semiconductors on track for their longest losing streak since May 2025 (SMH:NASDAQ)
- ad-hoc-news.de: Chip ETF Trades Near €100 as TSMC's Blowout Quarter Meets an OpenAI Revenue Riddle
- Kalkine Media: Are Chip Stocks Rattling VanEck Semiconductor (ASX:SMHG)?
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