The Semiconductor ETF (SMH) is experiencing a technical decline, with its 50-day moving average falling below the 200-day average. This follows Micron's disappointing Q1 2025 earnings report, which included lowered forward guidance and a 15% stock drop. While AI demand remains strong, concerns about NAND pricing and a delayed PC refresh cycle are weighing on the sector.
, noting – by their work – that the 50-day moving average for the SMH had now dropped below the 200-day moving average, which is not a positive technical development.Here’s a Worden chart which looks to be in slightly better technical shape for the semiconductor ETF: This Worden chart does not look as bad as the Bespoke chart, so what happens Thursday and Friday, January 2 and 3rd, will matter.
The semiconductor sector matters because the group has been the leadership group within technology since the October ’22 lows and certainly since 2023. You would be hard-pressed to find a day where Nvidia returned 150% for the first 6 months of the year;From 1/1/24 through 6/30/24, Micron returned 54% for the first 6 months of 2024;) reported their Q1 ’25 earnings results the night of December 18th, 2024, the DRAM and NAND producer lowered their forward guidance and the stock fell 15% the next day.Look at the size of the EPS reduction in MU’s ’25, ’26 and ’27 fiscal years between December 15th and December 31 ’24.The same with MU’s revenue revisions. Note the trend in revisions the last 12 months, and then look at the negative revisions the last 2 weeks. While the conference call noted that AI demand remains “robust”, the HBM line is still thought to be a smaller product line for Micron from what I’ve read. When you search for HBM or what is otherwise known as SDRAM, Samsung, Advanced Micro Devices , that shows the stock trading below the late, 2000 high of $96 – $97.50, which was the blow-off top around end of the large-cap growth and tech bubble in 2000. In the earnings preview of Micron’s quarter, it was explained to readers the inherent volatility in Micron’s business model and you see that in the above numbers and “post the fiscal Q1 ’25 quarter. Micron is not an easy stock to trade: it can go for long periods not earning it’s cost of capital and generating negative free-cash-flow. Within the VanEck Semiconductor ETF Nvidia currently sports a 19.4% weight, and still maintains the #1 weight in the ETF, while Micron is in the 10th spot in terms of ETF weight, and has a 3.7% weight currently.While technology has demonstrated strong outperformance the last 2 years, it’s the semiconductor sector which is the real leadership group within the technology sector. It’s not a plus when that leadership sector starts to flag, begins to rollover and lose relative strength.The semiconductor sector isn’t quite broken yet, but it’s stretched. This blog took small positions in Nvidia and the SMH for clients in the last 10 days, given the turn in sentiment, and the fact that the group is nearing some technical support, but these are smaller positions and meant as a trade. Dan Ives and Gene Munster and many of the great tech analysts remain solidly bullish on AI and the various segments, but the various stock action looks terrible. Look at Microsoft : Microsoft was the #1 equity position for clients since 2013 when the position started to be added to in size, but it has been cut back as of this fall ’24, and is no longer the #1 client equity position. has that honor, at present.) When Microsoft came out this week, saying their “capex” will increase sequentially every quarter going forward, the stock fell again, and returned just +12.91% in calendar 2024, versus the’s +24.89% return. (Microsoft is another stock that returned 21% in the first 6 month of 2024, and then fell -7.4% from July 1 ’24 through 12/31/24. For all the bullishness around tech and AI, the price action isn’t good. Many of these stocks are not yet “broken”, but they don’t trade well or react well to positive news.None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. Investing can and does involve the loss of principal even for short periods of time. LSEG is the source of Micron’s EPS and revenue estimate revisions. 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Semiconductor ETF SMH Micron AI Earnings Technical Analysis NAND Pricing PC Refresh Cycle
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