U.S. equities have seen some volatility in 2026, but they've mostly been able to hold up relatively well. The conflict in Iran is adding a layer of uncertainty to the markets, but that could also create some "buy low" opportunities.
One area that's compelling right now is tech, especially semiconductors.
While it's true that semiconductor stocks have been on a tear over the past few years, the artificial intelligence (AI) infrastructure boom is still in the early innings. The macro setup for the VanEck Semiconductor ETF (SMH 1.73%) still supports above-average returns over the short term.
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The important thing to do here is look forward, not back. Even though tech earnings have soared over the past year, the sector is still expected to deliver the best earnings growth of all the S&P 500 sectors in both 2026 and 2027. That means the fundamental foundation for this group is strong and still growing.
NASDAQ: SMH
Key Data Points
Investors might be naturally nervous about valuations here. The VanEck Semiconductor ETF currently has a trailing 12-month price-to-earnings (P/E) ratio of 43. But if you look at the P/E ratio for the ETF based on the next 12 months' earnings, it drops to 23. That's still elevated, but not nearly to the level that would suggest that the sector is overvalued, especially given its forecasted growth trajectory.
Overall, we're still in the midst of the semiconductor boom cycle, not near the end of it. Semiconductor stocks and the VanEck Semiconductor ETF have rewarded investors richly lately. But the rally isn't finished yet.
