This article digs into how the AI boom is pushing semiconductor stocks higher. It focuses on the VanEck Semiconductor ETF (SMH), shifting valuations, and some bold forecasts for earnings growth in 2026 and 2027.
There’s also a reminder here: investors should be careful about leaning too hard on past performance or rosy outlooks. Promotional disclosures are tied to the content, so keep that in mind.
AI-driven demand and the semiconductor sector
The AI surge keeps driving up demand for chips in data centers, edge devices, and AI accelerators. Semiconductor stocks are still leading the market, and it’s hard to ignore their momentum.
Plenty of investors use the SMH ETF to get exposure to this sector. As AI-driven orders pick up and companies expand capacity, SMH remains a go-to choice for many.
Market volatility and geopolitics—think about the conflict in Iran—still rattle nerves. But the underlying demand for chips seems strong enough to keep the rally going for chipmakers and their suppliers.
The real trick? Deciding if earnings growth can actually outpace all the ups and downs in the broader economy.
Valuation, earnings, and the AI infrastructure thesis
Valuation comes down to earnings momentum. The SMH’s trailing 12-month P/E sits somewhere in the low to mid-40s, but if you look ahead, the forward 12-month P/E drops closer to 23.
That gap shows investors expect real earnings growth, and honestly, a lot of analysts seem to agree with that perspective.
Many believe we’re still just getting started with the AI infrastructure boom. The expectation is for semiconductors to post the strongest earnings growth in the S&P 500 for 2026 and 2027.
That’s thanks to ongoing demand for memory, logic devices, AI accelerators, and more foundry capacity coming online.
- Strong earnings trajectory anticipated for semiconductors in 2026 and 2027—likely outpacing most other sectors.
- Valuation upside supported by a forward P/E in the low-to-mid 20s, which is much lower than the trailing multiple.
- AI infrastructure growth tailwinds keep blowing as cloud providers and enterprises scale up AI workloads, fueling chip demand.
Geopolitics, volatility, and investor opportunities
Macro factors like U.S. market swings and global tensions can shake things up. Iran-related headlines, for example, can trigger sudden risk-off moves.
But sometimes, those moments line up with good entry points for tech stocks—including semiconductors with real growth drivers behind them.
If you’re investing here, it probably makes sense to focus on forward earnings, financial strength, and whether chipmakers can keep expanding capacity and hold onto pricing power.
Just chasing past performance? That can lead you astray in today’s AI-driven market.
Promotions, disclosures, and how to navigate paid content
The article points out promotional content from sources like Motley Fool Stock Advisor. They highlight ten top stock picks, though SMH doesn’t make the list.
Honestly, it’s best to treat this kind of commentary as marketing material, not independent investment advice.
Disclosures make it clear that the content is syndicated. The Globe and Mail hasn’t vetted or endorsed any of it.
Investors should know that paid content and disclaimers might apply. It’s really important to do your own research before acting on any recommendations.
Here is the source article for this story: Bold Prediction: SMH Is About to Soar. Here’s Why.