It's been a historic time for chipmakers, to say the least. The VanEck Semiconductor ETF (SMH) has surged 75.5% in the first six months of 2026, driven by a 65% rally in the second quarter. Those gains mark both the fund's best first half and quarterly performance in more than a quarter of a century, since its inception in May 2000 — as investors continue to bet spending on artificial intelligence will stay high. Here are the stocks propelling the SMH higher: Micron Technology : +301% year to date; +239% quarter to date Intel : +257% YTD; +198% QTD Marvell Technology : +227% YTD; +180% in Q2 Arm Holdings : +214% YTD; +127% in the second quarter STMicroelectronics : +188% YTD; +116% for the quarter For all that, semiconductors are wrapping up the half and the quarter with loads of turbulence. SMH tumbled 7.3% just last week, as investors began rotating out of chips and into other parts of the market. That was the fund's worst week since April 4, 2025 — when it plunged 15%. Still, many on Wall Street think investors should stay the course on semis. "Tech and Semis were bound for pullback," wrote Jordan Klein, TMT sector specialist at Mizuho. The decline in chips last week coupled with a rebound in beaten-down software stocks "was way more end of quarter rebalancing by quants and relative managers vs anything worrisome or ominous," he said. Wolfe strategist Rob Ginsberg also thinks the technical outlook on the SMH remains solid. "Have Been Watching the Momentum Divergence Closely in SMH, But We Keep Coming Back to the 21-Day. It Held Beautifully in May and a Couple of Weeks Ago," he wrote on June 23. Indeed, the SMH has tested the 21-day moving average in recent weeks, yet has largely remained above it. Underpinning the technical strength are especially strong fundamentals in the memory chip sector. High bandwidth memory content in AI chips is continuing to increase, CLSA analyst Bhavtosh Vajpayee wrote in a Monday note to clients. He predicted it will surpass 500 gigabytes by 2030 and that supply-demand balance for memory components may not return before then. "It is too early to be fearful," he wrote. "There will be a downcycle in AI, but the feared over-supply scenario is now one for 2030, or perhaps 2H29 at the earliest." A recent deal between memory maker Broadcom and Alphabet's Google for its own custom AI chip, known as a TPU, is getting positive feedback from analysts for what it means for demand. "[The] TPU roadmap ... remains on track, or ahead," Blayne Curtis at Jefferies wrote Monday. "AVGO and Google signed a long-term agreement for future generations of TPUs through 2031 guaranteeing minimum revenue over those years." On top of that, retail investors still like chips — especially Micron. Data from Vanda Research shows Micron became the most bought stock among mom-and-pop traders on Monday, seeing roughly $30.8 million in inflows. That brought retail flows over the last two sessions to more than $103 million, the highest since mid-March. "There could be a few valid factors that may explain the recent share price pullback, but likely we have not yet reached the peak of this cycle," Nomura analyst Aaron Jeng wrote. "A pullback is healthy following such a surge over such a short period, particularly when we see some risks that have to be digested, e.g., the likely biggest-ever component supply mismatch, hyperscalers' 2027F free cash flow (FCF) issue, execution of many cutting-edge technologies beyond 2027F, and macro risks related to a yield uptrend," he said.

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Chip stocks close out their best first-half and quarter on record. What investors should do now

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