Nvidia, Semiconductor Sales in Focus as SMH Holds Gains

The Semiconductor Industry Association (SIA) reported Tuesday that global semiconductor sales jumped 15% on a year-over-year basis, as Regionally, as sales increased in China (27.4%), the Americas (26.3%), and Asia Pacific (11.1%), and only slight declines in other regions. 

The report also said March sales declined 0.6% month over month. 

The largest exchange-traded fund focused on semiconductor stocks, the VanEck Semiconductor ETF (SMH), was mostly flat midday. While investors appear cautious ahead of Nvidia’s earnings due later this month, the report’s issuer offered a bright outlook for the rest of the year. 

“The market is expected to continue to grow during the remainder of the year, with double-digit annual growth projected for 2024,” said John Neuffer, SIA president and CEO. 

Can Semiconductor ETFs Continue to Rise in 2024?

For investors expecting eye-popping sales increases and big earnings beats from Nvidia on a quarterly basis, anything less than extraordinary news may not be enough to push semiconductor stock prices higher, as they may already be priced to perfection. 

The average price-earnings ratio for holdings in the SMH ETF is 29, according to Morningstar, while the P/E on the S&P 500 index is just under 25, as reported by Y Charts. For reference, the average historical P/E for the S&P 500 ranges from 15-20. 

SMH is up about 10% since its most recent low on April 19 and is now trading around 5% below its all-time high price. 

Nvidia Earnings, Price Target in Focus

With Nvidia’s first-quarter earnings results slated for May 22, Goldman Sachs analysts maintained their buy rating on Nvidia stock Tuesday and raised their 12-month target price from $1,000 to $1,100. This price target represents an increase of 20% from Wednesday’s price of $916 and would mark an all-time high for the $2.2 trillion semiconductor company.