Why $VanEck Semiconductor ETF(SMH.US)Is Still A Buy?

🌟🌟🌟The Philadelphia Semiconductor Index has just wrapped up its 8th straight losing session. To make matters worse, hedge funds have sold off AI stocks for 5 consecutive sessions. Headlines are screaming "AI bubble". But let's pause.

Is $VanEck Semiconductor ETF(SMH.US)still a buy?

Yes it is because this isn't a structural collapse of AI. It is a textbook inventory and valuation sanity check.

SMH has taken a 9.70% haircut over the past week, testing crucial technical floors around the USD 537 to USD 539 mark.

The Culprits: A nasty cocktail of debt financing drama at AI cloud companies like Coreweave, sticky inflation spiking capital costs and macro jitters.

The Smart Money Exit: Hedge funds are fleeing to lock in profits, considering SMH was still up 44.6% YTD.

Why Is SMH Still A Buy?

SMH's foundation still remains rock solid for the following reasons:

The Infrastructure Inertia:

Data centers do not stop construction midway because of a bad week on Nasdaq. Billions of Capex are already locked in. Power contracts are signed. GPUs are ordered.

The Monopoly Board:

SMH is concentrated in the crown jewels of tech: $NVIDIA(NVDA.US)$Taiwan Semiconductor(TSM.US)and $Broadcom(AVGO.US). They are the money printing moat heavy monopolies. If you believe the world needs more computation tomorrow than it does today, you buy the chipmakers.

Overdone Bubble Fears:

Analysts noted that this pullback is pricing in a catastrophic tech crash that is not actually supported by the high enterprise demand.

Concluding Thoughts

When Wall Street is panicking, the long term compounding machines go on sale. Keep you head cool while everyone else runs for the exit.

As Warren Buffett famously said:

"The stock market is a device for transferring money from the impatient to the patient".

Dear fellow investors, do you agree with the Oracle of Omaha?