A new Nasdaq "power trend" has sparked life into last year's downtrodden tech sector. And as semiconductor stocks like Nvidia, Taiwan Semiconductor, Advanced Micro Devices and Broadcom nurture fresh rallies, the VanEck Semiconductor ETF offers investors investors a chance to profit from those moves. The SMH ETF earns a spot alongside other exchange traded funds like SPDR Materials on IBD Leaderboard.
Before fees and expenses, the SMH fund aims to replicate as closely as possible the price and yield performance of the MVIS U.S. Listed Semiconductor 25 Index. It tries to track overall performance of companies in both the semiconductor production and equipment spaces.
Owning shares in the SMH ETF instantly allows investors to have a stake in NVDA stock, AMD, AVGO, ASML, Qualcomm, Intel and others in the semiconductor sector. It enables investors to take part in these promising tech trends without taking the risk of betting on any one stock.
TSM, NVDA Stock Lead Top 10 Holdings
The SMH ETF covers the broad semiconductor sector. It comprises semiconductor manufacturers like TSM and Intel and fabless chip designers like Nvidia. Components of the ETF also include chip equipment manufacturers like Lam Research and data storage technology play Micron Technology.
| Company | Symbol | % of SMH |
|---|---|---|
| Taiwan Semiconductor | TSM | 11.61 |
| Nvidia | NVDA | 9.63 |
| ASML | ASML | 5.2 |
| Broadcom | AVGO | 5.1 |
| Qualcomm | QCOM | 5.09 |
| Advanced Micro Devices | AMD | 4.84 |
| Texas Instruments | TXN | 4.61 |
| Lam Research | LRCX | 4.58 |
| Micron Technology | MU | 4.56 |
| Intel | INTC | 4.51 |
Source: Fidelity |
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Nvidia, Tech Stocks In Demand Among Top Funds
Once regular members of IBD's monthly list of new buys by the best mutual funds, tech stocks like Nvidia, AMD and others remained conspicuously absent for most of last year. Both NVDA, AMD and others also failed to make this month's list, while AVGO stock did make this exclusive stock screen.
But signs of demand in tech names have certainly emerged.
Boosted by several weeks of heavy upside volume, Nvidia now sports an A+ Accumulation/Distribution Rating and a 1.6 up/down volume ratio. TSM stock (A+), ASML (A) and Lam Research (A-) also boast strong Accumulation/Distribution Ratings, indicating heavy buying by institutional investors over the last 13 weeks.
SMH ETF Rising As Nvidia, Fellow Chip Stocks Rebound
To kick off 2023, Nvidia has cleared a trendline and launched a breakout. And NVDA stock's 10-week moving average has climbed back above its 40-week line — a sign of rebounding technical strength.
Including positive trends in their key moving averages, this year's action in TSM, AVGO, MU, ASML, AMD stock and other chip names continues to bode well for the tech sector.
The VanEck Semiconductor ETF itself has shown a similar resurgence. The ETF's 10-week line has moved above the 40-week benchmark. Since clearing its 10-week and 40-week lines, it has continued to climb, posting a string of up weeks.
Last month, SMH cleared a 234.69 buy point in a first-stage cup base. Such early-stage bases are more likely to net rich gains than later bases. SMH rose 1.5% Monday in volume below average.
As TSM, AVGO and NVDA stock continue to show strength, the SMH ETF could offer investors a way to profit from that trend with less risk.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
