This SMH Chart Level Will Decide the AI Trade

This SMH Chart Level Will Decide the AI Trade Chip stocks led the AI rally, then gave back half of it. Here's the SMH chart level that decides whether the worst is over… Written by Larry Benedict Published on Aug 13, 2026 Chip stocks have been among the biggest winners of the artificial intelligence (AI) boom… until recently. AI hyperscalers are projected to spend over $700 billion this year alone. Money is being plowed into data centers and computing hardware to run AI applications, including semiconductors. Chip stocks are seeing an earnings boost as the profit outlook keeps growing brighter. Semiconductors represent up to 95% of the internal hardware value for a data center, so they’re major beneficiaries of the capital expenditures. That fueled strong gains for chip stocks. Starting in early April, the whole semiconductor sector took off and ran through the end of June. The VanEck Semiconductor ETF (SMH) went along for the ride. But since then, SMH and many of its biggest holdings are struggling for traction. Now a key chart level is coming into play that could tip the next move…

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Why Chip Stocks Ran Out of Steam Holdings in SMH include AI infrastructure stalwarts and companies seeing a sharp rebound in their earnings outlook. That includes names like Nvidia (NVDA), Advanced Micro Devices (AMD), and Micron Technology (MU). Those stocks helped power a massive rally in a short amount of time for SMH, which gained 84% in less than three months. Here’s the chart below. You can see that SMH was in a steady uptrend until “1,” which is when the gains really kicked in. The ceasefire development between the U.S. and Iran sparked the gap higher in early April. That period also ran into the start of first-quarter earnings season, where positive earnings revisions from AI capital expenditures fueled more gains. SMH ran all the way toward the $650 level in late June, when the rally started running out of steam. By that time, chart warnings were already showing that upside momentum in chip stocks was getting exhausted. A partial retracement of gains was expected. But now investors are wondering if the worst of the decline is over. How SMH handles a key chart level now in play should help tip whether the worst is over or if more downside is in store. Tune in to Trading With Larry Live Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Visit us on YouTube to catch the latest! SMH Is Testing Its 50-Day Moving Average The sharp gains in SMH created the right conditions for a mean-reverting move lower, which was also flagged by the Relative Strength Index (RSI). The RSI measures underlying price momentum. It started diverging negatively in June. Look at the chart again. As SMH made higher highs in price into the end of June, the RSI started making lower highs (dashed lines). That showed upside momentum was starting to fade. SMH was also extended far above the 50-day moving average (MA – blue line). A subsequent pullback in SMH took the ETF lower by 25%, which retraced about 50% of the entire rally since April. While the RSI didn’t quite extend to oversold territory below the 30 level, it fell to the lowest level since the selloff in April 2025 following the trade war. That sparked a rebound off the $500 level, which has the next big test in play. Look at the chart one more time. The bounce off the $500 level now has SMH pushing up against the 50-day MA from below at the arrow, which gives us the next big test to monitor. It’s common to see key support or resistance levels tested following a break… only for the trend to resume. So if SMH stalls out below the 50-day, then watch for the $500 support level to come into play once again. Regards, Larry Benedict Editor, Trading With Larry Benedict Get Instant Trade Alerts on Mobile! Click the icon below from your mobile device to download The Opportunistic Trader app today for one-tap access to trade alerts, issues, and model portfolios for all of Larry’s services. Available in the app store on Android and iPhone. More stories like this Read the latest analysis on hot growth stocks, and market-moving developments Big Tech’s $755 Billion AI Bet Big Tech is pouring $755 billion into AI this year. Here's why capex – not buybacks – is playing a big role in AI stocks’ performance this earnings season… Aug 12, 2026 • 3 min read A Better Trading Strategy Than Chasing the Next Nvidia Stop hunting for the next Nvidia. Here's the simple profit-taking strategy to turn small wins into big gains… Aug 11, 2026 • 3 min read Stock Market Breadth Says Don’t Trust This Rally Is this rally a dead cat bounce or the start of a more meaningful move higher? Aug 10, 2026 • 3 min read 1125 N Charles St, Baltimore, MD 21201 www.opportunistictrader.com To ensure our emails continue reaching your inbox, please add our email address to your address book. This editorial email containing advertisements was sent to penunggangbadai.moneyblog@blogger.com because you subscribed to this service. To stop receiving these emails, click here. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us here. © 2026 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. Privacy Policy | Terms of Use

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