Over the Line! Semis Test All-Time Highs Again

You can’t have any technology without chips.

That’s why Semiconductors are considered some of the most important stocks in the market. 

Right now, this critical group is trying to do something it hasn’t been able to do.

That is, break out to new all-time highs on an equally weighted basis.

Semis Are Top-Heavy

Semiconductors are one of those groups where the winners win and the best players score almost all of the points. 

For perspective, when you add up all the Semiconductor stocks in the world, they’re valued at about $8.6 trillion. 

Nvidia (NVDA), the world’s largest chip maker, is half of that, with a current market capitalization of $4.3 trillion.

The second- and third-largest chip makers, Broadcom (AVGO) and Taiwan Semiconductor Manufacturing (TSM), are worth $1.4 trillion and $1.2 trillion, respectively.

So the stock market’s version of the “Big Three” (for you pro basketball fans out there) is Nvidia, Broadcom and Taiwan Semi, with a combined market cap of more than $7 trillion.

That’s more than 80% of the entire value of all the chipmakers in the world. 

When I look at the equally weighted Semiconductor index making new all-time highs, that’s a total different look at the group altogether.

Line chart of S&P Semiconductor ETF (XSD) from 2019 to 2025, showing a rising trend with a new all-time high in 2024. Arc indicates upward momentum.

The SPDR S&P Semiconductor ETF (XSD) treats each of the Big Three stocks – NNDA, AVGO, and TSM – the same way it treats Advanced Micro Devices (AMD) and Credo Technology (CRDO). 

In this index – the one that just closed at a new all-time high – all of these stocks get treated equally.

It’s a Market-Cap Weighted World

The best players are supposed to score a lot of your points. That’s how I learned it. 

There’s nothing wrong with that.

In Semiconductor land, it’s to an obnoxious degree, I think we can all admit. 

Three companies alone represent more than eight-tenths of the global market.

The market-cap weighted VanEck Semiconductor ETF (SMH) has the Big Three at about 40% of its total assets under management.

It’s still top-heavy, for sure, as it should be. That’s just the world we live in.

Here’s SMH hitting new all-time highs last week:

Line chart of VanEck Semiconductor ETF (SMH) from 2020 to 2025, showing a steady rise. Highlights a new all-time high with a green circle.

This sets the stage for either a new leg higher or a massive failed breakout.

Based on current behavior, we can draw a line near those former all-time highs last year and see if they can hold those levels.

To quote the great Walter Sobchak, “Over the Line!” 

But if Semis manage to fail here, they can enter the proverbial “world of pain” Walter so passionately threatened.

In other words, if the SMH fails to hold these levels, that could pose a serious problem for Semis as a group. 

So, all eyes on those levels. Otherwise…

“Mark it zero, Smokey!”

The Dude Abides

An equally weighted Semiconductor index trying to break out again after failing a couple of times over the past year is a big one.

I mean, if both versions are making new highs, that indicates much broader strength for what is arguably the most important group of stocks in the market.

It’s not just the Big Three.

If the S&P Semiconductor Index is working, that’s a positive sign for the broader space.

Right now, the XSD has its highest short interest in more than four years.

You’ll be shocked to hear I think they’re all wrong.

I guess we’ll see…

Stay sharp,

JC Parets, CMT
Founder, TrendLabs