SMH: Mixed ahead of Nvidia’s (NASDAQ:SMH) earnings report

It’s all about semiconductors this weeknamely NVIDIA (NVDA). The largest component of the VanEck Semiconductor ETF (NASDAQ:SMH) reports its Q2 2025 earnings report on Wednesday after the close. Options traders are expecting a big move. Conformable on data from Option Research & Technology Services (ORATS), the straddle price is elevated to 9.6%.

This is significantly above the implied average post-earnings variance of 7.7%. Remember in May the stock jumped 9.3% on news of a stock split, with the company beating analysts’ sales and earnings estimates. NVDA it has traded ahead of earnings in five of the last six cases, and EPS is expected to have roughly tripled from a year ago.

Clearly, there is optimism in the report. But I see balanced risks in SMH right now too REITERATES a hold rating. His rating is high, one step away on the P/E multiple since we last looked at the fund in March, while seasonality favors the bears right now. With the ETF up 9% from my previous analysis, close to what the S&P 500 delivered, I assess the chart situation as we approach Q4.

Traders price in a 10% NVDA move after earnings

A busy calendar of corporate events ahead for the semi-finals

right issuerSMH seeks to replicate as closely as possible, before taxes and expenses, the price and yield performance of the MVIS US Listed Semiconductor 25 Index, which is intended to track the overall performance of companies involved in semiconductor manufacturing and equipment. The global index aims to track the most liquid companies in the industry based on market capitalization and trading volume.

SMH has grown significantly since my spring writing. Assets under management are now $23 billion, up from $18.6 billion five months ago. However, the ETF ranked No. 1 in its subclass according to Seeking Alpha’s Quant Ranking system, the fund Annual expense ratio of 0.35%. it is somewhat modest while it is 0.42% dividend yield is about a percentage point lower than that of the S&P 500. But stock price momentum is extraordinarily strong, an A+ grade ETF, and has been so throughout 2024, despite the market pivoting away from high-growth token stocks at times.

But SMH can be quite volatile. Its historical standard deviation is 28.7%, with an even higher annualized volatility risk metrics. However, SMH has very powerful features liquidity as its average daily volume is nearly nine million shares, while its 30-day average bid/ask spread is tight to a single basis point as of August 23, 2024, on VanEck.

Taking a closer look at the portfolio, the Morningstar 5-Star Silver-Rated ETF is concentrated in the upper-right corner of the style box, indicating its tilt toward large-cap growth. Only 5% of the fund is mid-cap and there is no access to large-cap value. Thus, SMH is a focused bet that the AI ​​theme and semiconductor demand will persist in the coming cycles.

Investors are paying a high price to own SMH. Its current price-to-earnings ratio is over 28, which is up from the start of the second quarter. It comes as SMH has risen, while EPS growth estimates for AI-related companies have started to decline. The fund also trades at a very high price-to-sales ratio of 9.1. Earnings quality is robust, however.

SMH: Portfolio and Factor Profiles

SMH is entirely an Information Technology allocation and there is a high concentration. The top 10 stocks account for nearly three-quarters of the ETF.

So it’s important to pay close attention to both the fundamentals and technicals of names like NVDA, Taiwan Semiconductor (TSM), and Broadcom (AVGO).

SMH: Information on holdings and dividends

Where we run into trouble, away from fundamental valuation, is the seasonal trends in the SMH today. April and September are its weakest months, with the latter surpassing the former for the biggest decline in 10-year average performance.

The good news is that October and especially November have been owned by the bulls for the past decade. Patience with an SMH entry today is prudent in my view. I will outline the key price points below.

SMH: September Seasonal Trends

Technical takeover

There have been material technical developments in recent months with SMH. Notice in the chart below that the stock has developed key support very close to the $200 mark. The fund fell to $198 at its lowest level since April before climbing to new all-time highs in the summer. A severe and rapid decline from mid-July to early August culminated in a drop to $200, a drop of nearly 30%. Despite falling below its 200-day long-term moving average, buyers rallied for a second time around $200.

The ETF recovered much of its summer losses, but its 50-day moving average emerged as resistance. Also, take a look at the RSI momentum oscillator at the top of the chart – it has printed a negative bearish divergence as the price has reached a new high. Moreover, with a large amount of bear volume over the past month and a half, the bears seem to have gained some control over the trend.

Overall, resistance is near $253 and $283, while support is in the $198 to $200 area.

SMH: Bearish RSI divergence followed by a test of support near $200

conclusion

I have a hold rating on SMH. I see its valuation as bullish, while seasonality and technicals aren’t all that encouraging, despite the fund’s long-term uptrend being intact ahead of NVIDIA’s Q2 report on Wednesday night.