Wall Street: Hold Semiconductor Stocks (SMH), Don't Add on Valuation Peak

Wall Street strategists are advising investors to hold existing positions in semiconductor stocks but caution against adding new ones, citing elevated valuations and potential for decelerating growth. The VanEck Semiconductor ETF (SMH) has nearly doubled since November 2025, approaching historical highs driven by robust artificial intelligence (AI) chip demand. The rally is underpinned by significant upward revisions to 2026 earnings forecasts for SMH components like NVIDIA (NVDA), AMD (AMD), and TSMC (2330-TW). Analysts have increased 2026 revenue estimates by 13% and EPS by 46% since November 2025. However, SMH's forward P/E ratio now exceeds 31x, near its highest in the past year. This rapid re-rating raises concerns about sustainability. Nearly 80% of S&P 500 semiconductor companies have seen upward profit revisions, an extreme level since at least 2003, historically preceding downward adjustments. Increased volatility, with SMH seeing daily swings over 1% since June 4, 2026, and a widening gap between the Cboe Nasdaq Volatility Index (VXN) and VIX, further signal potential pullbacks, according to Evercore strategists.