VanEck Semiconductor ETF declines as investor sentiment sours on AI spending without near-term returns, dragging chip stocks lower.
The VanEck Semiconductor ETF (SMH) has fallen approximately 20% from its recent high, reflecting a broader pullback in AI-related stocks. Investors are growing cautious over aggressive AI spending by companies like Alphabet and Meta Platforms, which has yet to translate into tangible financial gains, pressuring free-cash-flow growth.
SMH tracks the MVIS US Listed Semiconductor 25 index, offering concentrated exposure to major chipmakers such as Nvidia (21.7% weighting), Taiwan Semiconductor Manufacturing (9.5%), and Broadcom (6.7%). The ETF’s top 10 holdings account for over 70% of its portfolio, amplifying volatility but also driving its 50% gain year-to-date before the recent decline.
The downturn aligns with a cooling AI trade, as market participants reassess the timeline for returns on capital-intensive AI development. Semiconductor stocks, closely tied to AI infrastructure, have been dragged lower despite their foundational role in the sector.