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Semiconductor stocks are in the trenches of overbought territory. The relative strength index for the VanEck Semiconductor ETF (SMH) crossed 80 this week before pulling back to around 71, signaling the touted chip sector may be getting ahead of itself. The ETF has only crossed 80 four other times since its inception in December 2011. This recent move comes as the S & P 500 notches fresh all-time highs to start the year. “There’s nothing wrong with a good overbought condition, as many times it highlights the improving momentum of the underlying asset, but there are periods where it becomes too much of a good thing,” Wolfe Research macro strategist Rob Ginsberg wrote in a Thursday note. “Semis are the perfect example following their … recent parabolic advance.” The SMH is up more than 8% year to date. In 2023, it soared more than 72%. It’s also up more than 1% this week. SMH 1Y mountain SMH in past year The largest component of the ETF is chipmaker and artificial intelligence darling Nvidia , which has gained more 24% from the start of 2024. Nvidia’s strong gain follows an impressive 239% gain in 2023. Nvidia’s rise last year underpinned the broader markets climb in 2023 into the new year. Against this backdrop, CNBC Pro looked looked into the SMH to see which individual chipmakers were also overbought. A stock or an asset is considered overbought when its 14-day RSI breaks above 70. A reading below 30 could indicate a buying opportunity as stocks are potentially oversold. Nvidia is the most overbought stock on the list with a 14-day RSI reading of 83.91. The stock has gained nearly 4% from the start of the week through Thursday alone. Analysts are exceedingly bullish on the stock, with 84% of those polled by FactSet maintaining a buy rating. Nvidia’s rise in the past year has been underpinned by the company’s broadening exposure to artificial intelligence. In 2023, the chipmaker became the latest U.S.-listed company to reach a $1 trillion market capitalization. Broadcom also made the overbought list with a 14-day RSI reading of 71.71. Shares have climbed roughly 2% this week, and about 55% of analysts polled by FactSet rate the stock as a buy. Shares climbed to their highest level in a year in early December after Citi resumed coverage of the stock and increased its price target. The firm pointed toward “strength in the core business and accretion from the VMware acquisition.” Other chip stocks on the overbought list include sector heavyweight Taiwan Semiconductor and AMD .
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