Javed Mirza VanEck Vectors Semiconductor ETF SMH-Q WATCH Jan 31, 2025

Likes Nividia, AMD and LAM Research, but not the SMH ETF, because there's such a dispersion with this sector.

It was a good play on the semis sector, but now it's volatile. He prefers holding individual names, like Broadcom, AMD and Nvidia.

There's been institutional buying of the semis stocks. Analysis says that semis have been in a long-term uptrend after capitulating in early 2020, though there was middling turbulence along the way, like the pandemic boosting PC sales, then those sales falling post-Covid, pulling back 50% from highs. Ugly. But after the late-2022 bottoms in semis (and the market), semis have been rising in a nice run. Rising interest rates were killing anything tech for a while last year. The summer 2023 pullback was shallower with lower volumes than the summer 2022 pullback, says data; support held last summer. That led to a strong rebound last fall. Analysis says semis can add another 25%, but not in a straight line. Wait for a temporary pullback before pulling the trigger.

Chips are must-haves in a client portfolio given trends in EVs, AI and data centres which all need chips. Chip revenues are about half-trillion today, and are expected to doubole by 2030. Buy an any pullback. Also lieks chips because of the cyclical story. After de-stocking, inventories of semis rose which weighed on the semis sectors. But slowly, those inventories are declining. Also, chip demand is closely tied to performance in the manufacturing sector. Watch Wednesday's manufacturing PMI and see if it continues to increase.

The semi trade is driving the market and economy. Chips are the new oil. Today, the S&P is recovering nicely today. Nvidia is rising again (though is actually flat in the morning).

Heading into NVDA's report late Tuesday, there's more downside than upside risk in the short run, but not long term. The chart could be a head and shoulders. Definitely, buy dips and don't chase.

Some of these stocks fell 40-60% like Micron, bit NVDA was among the least. This recent decline is the worst selling and won't worsen. The market wants to buy them on weakness.

The semis have had a brutal quarter, reaching a key point now. If they don't deliver earnings, the stocks can break down further. Don't sell now, but if they miss earnings, then sell.

Concerned about semis in general. Down over 12% since July peak, and hasn't recovered the way the rest of tech has. NVDA is 25% of this index; if you take this out, average semiconductor stock is down 15-20%.