SMH Returned Over 120% in One Year. Is the VanEck Semiconductor ETF Still a Buy?

By David Dierking – Apr 15, 2026 at 11:00AM ESTKey PointsThe VanEck Semiconductor ETF (SMH) is up 120% over the past year and a 51% average annual return over the past three years.Megacap tech companies' capital expenditure commitments and continued double-digit growth in chip equipment sales remain as bullish catalysts.The semiconductor sector is only trading at 22 times forward earnings, not unreasonable for a high-growth sector.Semiconductor stocks have unquestionably been one of the market's biggest winners coming out of the 2022 bear market. The artificial intelligence (AI) boom created unprecedented demand for the chips necessary to power the infrastructure. That's produced triple-digit gains for many semiconductor exchange-traded funds (ETFs) along the way. One of those is the VanEck Semiconductor ETF (SMH 0.23%). Among the major nonleveraged semiconductor ETFs, its 51% average annual return over the past three years is the best of the bunch. Naturally, that raises the question: Is it too late for chip stocks, or is there more upside ahead? Image source: Getty Images. Key takeaways SMH's outperformance was driven by its concentrated holdings, including an 18% weighting in Nvidia. Semiconductor equipment sales are expected to surge to $156 billion by 2027. Roughly one-quarter of SMH's portfolio is in equipment companies. This gives investors exposure to the entire supply chain, not just chip designers. The portfolio trades at roughly 22 times forward earnings, which is not unreasonable for a high-growth sector. The semiconductor trade retains high demand The case for chip stocks is pretty straightforward. As companies, governments, and others continue to build out AI capabilities, demand for the chips to run them also grows. Global semiconductor equipment sales are expected to hit $156 billion by 2027. That would be a big jump from their current record high of $133 billion in 2025. The big megacap tech companies continue to commit hundreds of billions of dollars to AI development. While there are questions about the long-term return on investment on all that spending, it's clear it won't end anytime soon. That's a strong bullish catalyst for chip stocks. The semiconductor investment case The biggest question at this point might be valuation. You don't want to pay too much for an investment, even if it is one of the market's biggest growth stories. The VanEck Semiconductor ETF currently trades at a forward price/earnings (P/E) ratio of 22. That's reasonable given how fast this sector is growing. One risk is that when growth rates slow or peak, valuations are likely to contract quickly. But I don't think that's a risk just yet. ExpandNASDAQ: SMHVanEck ETF Trust - VanEck Semiconductor ETFToday's Change(-0.23%) $-1.04Current Price$450.96Key Data PointsDay's Range$447.89 - $452.6752wk Range$184.40 - $452.67Volume2.5M SMH vs. SOXX: Which semiconductor ETF fits your portfolio? This ETF often gets compared to the iShares Semiconductor ETF (SOXX 0.60%) since they're easily the two biggest funds in this space. Here's a comparison of the two: MetricSMHSOXXNumber of holdings2630Expense ratio0.35%0.34%WeightingMarket cap (20% cap)Market cap (8% cap)Top 10 concentration73%59%10-year annualized return33.2%30.3%Best use caseMegacap sector concentrationSlightly more balanced megacap exposure Data source: SMH website, SOXX website, ETF Action. There's really not much difference between these two ETFs. The biggest differentiator is the weighting cap. The cap makes the iShares Semiconductor ETF only slightly more diversified (with modestly less Nvidia exposure). Other than that, you get similar large-cap exposure. The investment case for chip stocks is still strong. The sector is in the midst of a multiyear growth cycle, and valuations are reasonable enough that there's still upside. I wouldn't necessarily expect triple-digit returns again over the next 12 months, but this is still a sector with a very positive narrative.Read NextMar 22, 2026 •By David DierkingBold Prediction: SMH Is About to Soar. Here's Why.Apr 15, 2026 •By Bram BerkowitzThe S&P 500 Has Erased Every Loss From the Iran War.

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