Semiconductor ETF surges 73% as AI demand fuels chipmaker growth

The semiconductor sector continues to show strong growth, with the VanEck Semiconductor ETF (SMH) rising by roughly 73% over the past year. Analysts now expect the fund to deliver above-average returns in the near future, driven by ongoing demand for artificial intelligence (AI) infrastructure.

The ETF's performance reflects heavy investment in leading chipmakers. Its top holdings include NVIDIA at 21%, Taiwan Semiconductor Manufacturing at 10.15%, Broadcom at 8.41%, Micron Technology at 5%, and AMD at 4.96%. These companies have seen market values climb sharply as AI adoption accelerates.

Current valuations suggest optimism about future earnings. The ETF's trailing 12-month price-to-earnings (P/E) ratio stands at 43, but its forward P/E drops to 23, indicating expectations of strong profit growth. Industry forecasts also place tech earnings—led by semiconductors—as the fastest-growing sector in the S&P 500 for 2026 and 2027. Experts argue the AI infrastructure boom remains in its early phases. This extended growth cycle suggests the semiconductor rally may have further to run, with demand for advanced chips still expanding.

The VanEck Semiconductor ETF's recent gains highlight the sector's momentum, backed by AI-driven demand. With forward earnings projections significantly lower than current valuations, the fund's outlook remains positive. Investors continue to bet on sustained growth as tech infrastructure builds out further.