Semiconductor ETF could rise 50%, Vermeulen says, but warns of steep losses if support breaks

Semiconductor stocks could lead a renewed year-end rally, with the SMH semiconductor ETF showing a technical pattern indicating about 50% upside. A break below key support, however, could trigger steep losses, making sustained price gains and incoming capital central to confirming the market’s direction.

In an October 27 interview with Schwab Network, Chris Vermeulen, founder and chief executive officer of The Technical Traders, said SMH had formed a bullish flag pattern. He said a semiconductor breakout could also lift the Nasdaq about 20% by year-end.

Vermeulen said both long-term and short-term semiconductor trends pointed higher. He cited a historical S&P 500 gain of about 14.1% in the six months following midterm elections, alongside the seasonal support associated with a year-end Santa Claus rally.

A potential Anthropic initial public offering before year-end could provide another sentiment catalyst, he said. Giving retail investors an opportunity to own shares could revive interest in the market, although that assessment depended on the offering taking place.

He expected any advance to concentrate in large technology and AI stocks. New semiconductor highs could draw investors off the sidelines into familiar names such as Micron, AMD and Nvidia, he said. He also cautioned that a rapid, euphoric advance could lose momentum sharply.

Vermeulen cautioned against relying on seasonality alone. He described the market as being near an important low in his time-cycle analysis, where a failure of the upward trend could accelerate selling. He said the Nasdaq fell about 19% after a cycle low on February 28, 2025, broke down, while another failure on March 5 this year preceded a rapid market decline of about 8%.

For SMH, he identified about $520 a share as a key threshold. A break below it could open a move toward about $371, which he described as roughly 31% downside. He also outlined about 20% downside for the Nasdaq if the current cycle failed, while identifying $591 a share as the next major support level for QQQ, representing a decline of about 17%.

Price remained his primary indicator. Vermeulen said confirmation would involve gains holding for a week to a week and a half, accompanied by trading volume and capital entering technology and AI stocks. He also highlighted potential flows out of gold, utilities, consumer staples and health care into risk assets.

Turning to precious metals, Vermeulen said gold and silver had entered a bearish phase around June after an early-year surge in prices and sentiment. He pointed to lower highs, lower lows and falling moving averages. A renewed equity rally could pull capital from metals toward AI stocks, he said, citing downside targets of about $3,300 for gold and $39 an ounce for silver.

Vermeulen remained positive about precious metals’ longer-term role as a hedge against weakening confidence in currencies and governments. He said a decline to those levels could mark a major cycle low, but any recovery would require confirmation from prices, potentially in early or mid-2027. His closing emphasis was on protecting capital while waiting for a clearer trend.