The technology sector is the best-performing group in the S&P 500 this year and semiconductor stocks and the related exchange traded funds are big reasons why.
For example, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) are up an average of 17%.
Those gains for the semiconductor ETFs are more than double the returns of the S&P 500 and well ahead of broader tech ETFs. Semiconductor ETFs have recently been durable performers as semiconductor stocks are rebounding to steady the broader technology sector, but that does not mean the gains are over for this suddenly hot group. However, valuations are rising for chip stocks.
Additionally, there are growing concerns among industry observers and technical analysts that semiconductor stocks are poised to retreat.
Right now, I’m starting to see some little divergences crop up when I look at the relative strength indexes, the [moving average convergence/divergence]indicators; they’re not making new highs alongside the index itself,” said Craig Johnson, technical analyst at Piper Jaffray, in an interview with CNBC.