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Semiconductor Stocks Are Cheaper Than the S&P 500: Is It Time to Buy SOXX and SMH ETFs?

Reviewed by ClearTape · Source: Benzinga

Key takeaways

Semiconductor stocks have seen a sharp valuation reset, with the S&P 500 Semiconductors Index forward
P/E
Price-to-earnings — how expensive the share price is versus the company’s recent profit per share.
Learn more →
falling to 14.7x on Oct.
S&P 500 Semiconductors Index forward
P/E
Price-to-earnings — how expensive the share price is versus the company’s recent profit per share.
Learn more →
14.7x (Oct. 30)
S&P 500 forward
P/E
Price-to-earnings — how expensive the share price is versus the company’s recent profit per share.
Learn more →
18.9x
SOXX fell 8.24% on Friday

What happened

Semiconductor stocks have seen a sharp valuation reset, with the S&P 500 Semiconductors Index forward

P/E

Price-to-earnings — how expensive the share price is versus the company’s recent profit per share.

Learn more →

falling to 14.7x on Oct. 30 from about 33x a year earlier. The multiple is now below the S&P 500’s forward P/E of 18.9x, reversing the premium the sector had during the AI rally. The drop has hit semiconductor ETFs hard: iShares Semiconductor

ETF

Exchange-traded fund — a basket of stocks or bonds you can buy like a single share.

fell 8.24%, VanEck Semiconductor ETF (SMH) 6.98%, and SPDR S&P Semiconductor ETF 6.30% on Friday, and all three lost 14‑17% in October.

Why it matters

The sector’s valuation compression could mean earnings growth must stay strong to justify the discount, while earnings revisions could erode the perceived bargain. The

ETF

Exchange-traded fund — a basket of stocks or bonds you can buy like a single share.

performance differences highlight how concentration and holdings affect risk and return.

Short-term and longer-term

Short-term. Over the next few days, watch for a break above SOXX’s $530 resistance or a dip below XSD’s $452 support.

Longer-term. For the coming months, the key question is whether semiconductor earnings can justify the lower multiples.

Words on this card

forward P/E: A valuation metric that estimates a company’s price-to-earnings ratio using projected earnings for the next year.
ETF Learn: An exchange‑traded fund that holds a basket of securities, allowing investors to trade a group of stocks as one.
resistance: A price level where selling pressure historically prevents the asset from rising further.
support: A price level where buying pressure historically prevents the asset from falling further.
P/E Learn: Price-to-earnings — how expensive the share price is versus the company’s recent profit per share.
Earnings Learn: A company’s results report — usually profit and sales for a quarter, plus any update on what comes next.

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