Semiconductor ETF's China Problem Is Now a Two-Front War
Published on 08/06/2026 at 16:04 | Redaktion boerse-global.de
The VanEck Semiconductor UCITS ETF is caught in an increasingly awkward position: its biggest holdings are being squeezed by Chinese competition from two directions at once, even as the fund's own investors refuse to walk away.
The fund slipped another 0.58 percent on Thursday to 92.12 euros, extending a slide that has now left it 17.14 percent below its 52-week high of 111.18 euros, set in late June. That gap has widened slightly from the 16.91 percent deficit recorded at the start of the week, when the ETF traded at 92.38 euros.
A cap that saved the fund
The divergence between those two numbers — a 73.42 percent gain over the past year against a double-digit drawdown from the peak — tells the real story. The AI trade that powered the sector to record levels has cooled sharply since June, with investors demanding concrete results from chipmakers rather than growth promises.
Part of the fund's relative resilience lies in the index it tracks. The MarketVector U.S. Listed Semiconductor 10% Capped Screened Index limits any single position to 10 percent and rebalances quarterly. That cap has done its job: Nvidia, which has underperformed smaller names like Micron Technology and Advanced Micro Devices in recent weeks, cannot drag the fund down as heavily as it otherwise would. Without the constraint, the recent Nvidia weakness would have hit the ETF considerably harder.
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The 50-day average of 97.75 euros sits above the current price, reflecting the short-term downward pressure. The annualized 30-day volatility of 58.64 percent underscores just how turbulent the sector has become, while an RSI of 48.1 suggests the fund is neither oversold nor overbought.
The Chinese challenger
The immediate trigger for Thursday's decline was a Reuters report that major tech companies are evaluating manufacturing equipment from Chinese producer Advanced Micro-Fabrication Equipment for use in their Chinese facilities. That news lands directly on two of the fund's core holdings: Applied Materials and Lam Research, the U.S. suppliers that have dominated the etching equipment market.
Both companies now face the prospect of being squeezed by stricter U.S. export rules at the same time as Chinese customers pivot toward domestic alternatives. The Financial Times added to the pressure with reports that Chinese regulators are considering tougher export controls on AI and semiconductor technology — regulatory uncertainty closing in from both sides.
This follows an earlier geopolitical shock that hit the fund in late July, when reports emerged of a Chinese company developing an immersion lithography machine, a field long dominated by ASML. The ETF lost more than two percent in a single session on that news.
Sundeep Gantori, chief investment officer for equities at Standard Chartered, frames these developments primarily as a sentiment problem. Reports of China's ambitions in memory chips and lithography have amplified investor unease, he argues, though he believes the long-term market is large enough for multiple suppliers to coexist. Memory chip prices, in his view, may not peak until 2027 — and at current valuations, the risk-reward ratio has already improved.
Earnings that weren't good enough
The fund's moves also reflect a market that has become brutally demanding on quarterly reports. AMD beat Wall Street expectations on both revenue and outlook — and still saw its shares fall 8.8 percent in after-hours trading. The problem: after a 142 percent rally since the start of the year, even strong numbers no longer satisfy.
Taiwan Semiconductor Manufacturing showed a similar pattern on a smaller scale Wednesday, slipping 0.55 percent to 414.88 U.S. dollars despite remaining in an uptrend. The stock still trades about 15.7 percent above its 200-day line, and TSMC remains one of the fund's largest single positions.
Memory chips carry the rally
While equipment makers and foundries wrestle with headwinds, the memory segment is firing on all cylinders. The PHLX Semiconductor Index jumped more than 6 percent, dragging the S&P 500 to fresh records. Micron Technology gained 8 percent, SK Hynix rose 6 percent, and Marvell Technology surged 14 percent. Intel added 10 percent, Nvidia climbed nearly 2 percent, and AMD advanced 7 percent ahead of its earnings release.
The rebound follows a brutal stretch in which the sector tumbled more than 20 percent from record highs, driven by fears over cloud providers' AI spending and China's technological catch-up. In Asia, the Kospi jumped 4.0 percent on the strength of SK Hynix and Samsung, extending Wall Street's rally.
Money keeps flowing in
Despite the turbulence, capital continues to flow into the ETF — a sign that many investors view the pullback as a buying opportunity rather than an exit signal. Demand for chips still outstrips supply, giving manufacturers pricing power and supporting earnings expectations.
The strategic calls from major banks remain split. JPMorgan sees a summer buying opportunity in chip stocks, while Morgan Stanley expects a more difficult environment through the rest of 2026. The direction of the current pullback — whether it proves a brief pause or the start of a longer consolidation — will likely hinge on the trajectory of AI investments from the major cloud providers.
The fund's range over the past year tells its own story: from a 52-week low of 40.30 euros in August 2025 to the June record, a swing of more than 128 percent. That volatility captures how sharply the sector has oscillated between euphoria and anxiety — and how central Chinese competition has become to the outlook for U.S. equipment makers.
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