Chip ETF Caught Between Record Earnings and Washington's Polysilicon Threat

VanEck chip ETF swings on record AI spending forecasts and new US tariff threats, with AMD's strong quarter failing to calm nerves.

The VanEck Semiconductor UCITS ETF has spent the past week swinging between euphoria and anxiety, closing Wednesday at 92.64 euros after a 2.30 percent slide that erased part of Tuesday's explosive 6.54 percent rally. The whipsaw action captures a sector torn between stellar corporate results and fresh political risk emanating from Washington.

Tuesday's surge to 94.82 euros came on the back of blockbuster capex forecasts from major US banks. Bank of America projects hyperscalers will lift investment spending to more than 1.2 trillion dollars within twelve months, up from roughly 700 billion dollars, with this year's outlays estimated at 859 billion dollars — a 79 percent jump year-on-year. Morgan Stanley's numbers paint a similar picture: 800 billion dollars for 2026 and 1.2 trillion for 2027. Backing those projections are contractual commitments already on the books — cloud providers hold customer obligations worth 2.3 trillion dollars, according to Bank of America, which issued nine buy ratings with at least 30 percent upside potential across names including Marvell, Nvidia, Broadcom, AMD and Micron.

A Brutal July Precedes the Bounce

Wednesday's pullback, however, shows how quickly sentiment can sour. The trigger this time is political rather than fundamental: the Trump administration is reportedly preparing minimum import prices and new tariffs on polysilicon, the material essential to both solar cells and chip manufacturing. The measures aim to shield domestic producers like Hemlock Semiconductor and Wacker Chemie from Chinese competition, but analysts at Deutsche Bank and others warn they could meaningfully raise supply-chain costs for major chipmakers — even as global AI infrastructure investment heads toward roughly 695 billion dollars by 2026.

The sector's recent history explains the jitters. Chip stocks worldwide shed more than three trillion dollars in market value during July, one of the weakest months in recent sector history, as concerns mounted over stretched valuations and a possible AI bubble. The VanEck fund itself lost 5.84 percent on a monthly basis before the rebound took hold. That investors never truly abandoned the space is evident from the iShares Semiconductor ETF, which despite a 22.1 percent July decline — its worst month since December 2002 — attracted net inflows of 6.92 billion dollars, the highest monthly figure in its history.

AMD's Record Quarter Fails to Satisfy

The fund's largest holding, AMD at roughly 11.16 percent weighting, delivered numbers that would normally spark celebration. The chipmaker reported record second-quarter revenue of 11.5 billion dollars, up 50 percent year-on-year, with its data-center business doubling. Yet shares slipped in after-hours trading as management's cautious outlook tempered enthusiasm — a reminder that in this market, even exceptional results face scrutiny.

Elsewhere, Asian memory-chip makers bucked Wednesday's broader weakness. SK Hynix climbed 5.8 percent in Seoul and Samsung Electronics added 2.5 percent following the opening of the "Future of Memory and Storage" trade show in Santa Clara, where SK Hynix and SanDisk jointly unveiled the first standard specifications for High Bandwidth Flash. The new memory technology aims to boost AI data-center performance via the Universal Chiplet Interconnect Express interface, positioning the open standard as a response to surging demand for high-speed connections in AI systems.

Single Stocks Drive the Recovery

Tuesday's rally was powered by outsized gains in key portfolio names. Micron jumped 8 percent after Bank of America reaffirmed its buy rating and raised its price target to 1,550 dollars, citing intact pricing power in memory chips. Arm climbed more than 11 percent to 266.63 dollars following a second consecutive quarter of license revenue growth exceeding 100 percent year-on-year in its data-center business. ON Semiconductor also advanced, with second-quarter revenue up 9.2 percent and adjusted earnings per share nearly 40 percent higher, supported by strong AI data-center demand.

The renewed interest has even spawned new product offerings: REX Shares launched two leveraged certificates on the US-listed VanEck Semiconductor ETF on Tuesday, one with triple-long and one with triple-short exposure — a sign of how heavily traders are now betting on short-term sector moves.

A Market Still Searching for Direction

The fund currently sits 16.68 percent below its 52-week high of 111.18 euros, reached on June 30. Technical indicators suggest a market in equilibrium rather than overdrive: the 14-day RSI stands at 48.4, while the annualized 30-day volatility of roughly 60 percent underscores the sector's propensity for violent moves in both directions. ASML, meanwhile, paid its scheduled dividend of 1.88 euros per share; the Dutch equipment maker has lost about 19 percent since its June peak, though Bank of America analysts consider concerns about Chinese competition overblown and remain positive long-term.

Over seven days the fund is still up 13.35 percent, and on a twelve-month basis it has gained 125.02 percent. Whether the current recovery extends beyond its initial burst will depend on whether the hyperscalers' promised investment figures translate into actual chip orders — and on how concrete Washington's polysilicon plans turn out to be. Until then, the sector's direction will be set by the tug-of-war between exceptional fundamentals and political uncertainty.