After lagging the broader market this quarter, the semiconductor sector may be on the cusp of recovery. VanEck Semiconductor ETF Nasdaq: Smh It has only gained 8.36% quarter-to-date, underperforming the Invesco QQQ ETF. Nasdaq: QQQWhich rose by approximately 14%. However, the trend may change following Broadcom Inc.’s excellent earnings and outlook. Nasdaq:AFGOone of the giants of the sector and the newest member of the trillion dollar club. With the SMH ETF regaining key technical levels and approaching significant resistance, investors are asking: Is now the right time to re-enter semiconductors?
Broadcom’s impressive forecasts point to the strength of the sector
Broadcom today
(As of 06:00 PM ET)
- 52 week range
- $104.15
▼
$251.88
- Dividend yield
- 0.98%
- P/E ratio
- 208.71
- Price target
- $220.54
Broadcom, the third-largest semiconductor company by market capitalization and a 7.7% major stake in the SMH ETF, had an outstanding performance in its recent fourth-quarter results. The chipmaker’s revenue rose 51.2% year over year to $14.05 billion, while earnings per share (EPS) of $1.42 beat analysts’ estimates of $1.39. This marked Broadcom’s first entry into the trillion-dollar club, with its market cap now exceeding $1.1 trillion.
Broadcom’s bullish outlook for AI-related revenues was a key driver of its performance. CEO Hock Tan revealed that Broadcom’s AI chip and connectivity business is expected to generate between $60 billion and $90 billion annually by FY2027, a sharp increase from the $12.2 billion recorded in FY2024. This growth opportunity, driven by In partnerships with hyperscale clients like Google Nasdaq:GoogleMeta platforms Nasdaq: MetaAnd ByteDance, Broadcom has managed to gain significant market share in the AI infrastructure space.
Tan’s comments sparked renewed optimism, as artificial intelligence remains a cornerstone of semiconductor growth, giving investors reason to believe the sector’s outlook is turning to the upside after a period of uncertainty.
From bearish sentiment to bullish setup
The semiconductor sector has faced challenges since the November 5 elections. Industry leader Nvidia Nasdaq: NVDAthe top holding of the SMH ETF, has fallen slightly since early November and is down nearly 5% this week alone. Heightened geopolitical risks, valuation concerns, and macroeconomic headwinds, including slowing demand for consumer electronics, contributed to the sector’s weak performance.
Investors also rolled capital into shares of the “Magnificent Seven”: Apple Nasdaq: AppleMicrosoft Nasdaq: MSFTTesla Nasdaq: Teslaalphabet Nasdaq:GoogleAnd Amazon Nasdaq: AMZNwhich has dominated the market’s gains in recent weeks.
VanEck Semiconductor ETF Today
Van Eck Semiconductor Corporation
(As of 05:56 PM ET)
- 52 week range
- $163.97
▼
$283.07
- Dividend yield
- 0.42%
- Assets under management
- $24.31 billion
However, the narrative may be changing. With Broadcom’s stellar earnings and Magnificent Seven shares trading at high RSI levels, investors can see emerging opportunities in the semiconductor space. The SMH ETF reflects this potential shift, having reclaimed its 20-day, 50-day and 200-day moving averages. As of Monday’s close, the ETFs were hovering near downtrend resistance, suggesting that a break above the $235 level could confirm a trend reversal in the higher time frame.
Positive flows strengthen the sector’s condition. SMH has seen a 2.15% increase in inflows over the past three months, indicating renewed interest. If capital begins to rotate out of the enlarged technology leaders and market breadth improves, semiconductors could benefit from a notable rebound.
Monitor the rotation and confirm the breakout
The key going forward will be to monitor whether capital starts flowing back into semiconductors if the momentum in Magnificent Seven shares stalls. If the semis can break through current resistance levels while prominent technology leaders consolidate, it could mark the beginning of a sector turnaround, fueling a broader recovery. Broadcom’s strong AI-driven outlook and SMH’s improving technical position suggest that the semiconductor sector could be in bullish mode, especially if a return to the sector is confirmed as market breadth improves.
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