New York, July 16, 2026, 14:06 EDT — The VanEck Semiconductor ETF (NASDAQ: SMH) experienced a sharp decline of 4.2% in early afternoon trading, falling to $565.69. This drop pushed the fund below its lower DeMark pivot of $586.09, a key short-term support level established on Wednesday. The breach was decisive, with SMH trading $20.40 below support, a gap larger than the full $18.51 range between Wednesday's upper and lower pivots.
The selloff was broad-based, with approximately 80% of the loss attributed to holdings other than Nvidia (NASDAQ: NVDA) and Taiwan Semiconductor Manufacturing (NYSE: TSM). According to VanEck's June 30 weighting data, these two stocks together accounted for 26.84% of SMH's assets but contributed only about 0.81 percentage point, or 19%, of the ETF's decline. The top ten holdings, which represent 70.24% of assets, all participated in the downturn, signaling a widespread market move rather than company-specific issues.
The broad drop overshadowed a stellar earnings report from Taiwan Semiconductor. The company reported second-quarter revenue of $40.20 billion, a 33.7% increase year-over-year, while net income and diluted earnings surged by 77.4%. Chief Financial Officer Wendell Huang attributed the strong performance to robust demand for leading-edge processes. TSMC also provided an optimistic third-quarter outlook, forecasting revenue between $44.6 billion and $45.8 billion. However, its ADR still fell 3.5% as the company raised its 2026 capital spending target to $60 billion-$64 billion, up from a previous range of $52 billion-$56 billion, prompting investors to question the returns on this next wave of investment.
Comparatively, the iShares Semiconductor ETF (NASDAQ: SOXX), SMH's nearest listed peer, dropped more sharply, declining 5.17% to $526.56. SMH's relative outperformance, beating SOXX by about 0.9 percentage point on Thursday, may be attributed to its 17.55% weighting in Nvidia, which fell less than both funds. Despite the selloff, SMH has posted a 63.98% NAV gain year-to-date through July 15, with $70.83 billion in assets under management. A rough compounding forecast suggests a 2026 gain near 57%, indicating the trade remains profitable but with reduced margin for error.
Technical signals had been mixed ahead of the breakdown. Zacks maintained a Rank 1 (Strong Buy) on SMH, citing momentum as a key factor, while a TradingView contributor warned that the March rally was nearly vertical and unsustainable. The lower pivot on Wednesday failed to hold, leading to the current bearish signal. A move back above $586.09 would ease Thursday's bearish pressure, while further selling below the $564.54 intraday low would exacerbate the situation. For now, $586.09 marks the first recovery test, with the $604.60 upper pivot appearing much more distant.
Risks remain balanced. TSMC's stronger third-quarter outlook could attract dip-buyers, potentially reversing the recent decline. However, the broader selloff and increased capital spending raise concerns about the sustainability of the semiconductor rally. Investors will closely watch for any further deterioration in breadth or a recovery above the key pivot levels.
