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Semiconductor stocks are in overbought territory. The VanEck Semiconductor ETF’s (SMH) Relative Strength Index has returned to around 71 after climbing above 80 this week, suggesting the hot chip sector may be ahead of the curve. The ETF has only topped 80 four other times since its inception in December 2011. The move comes as the S&P 500 hit new highs at the beginning of the year. “There’s nothing wrong with overbought conditions being good; in many cases, it’s a sign that momentum in the underlying asset is improving,” Wolf Research macro strategist Rob Ginsberg said in a note Thursday. “But there are times when that becomes too much of a good thing.” “The semi-finals are a perfect example following their…parabolic recent progress.” SMH is up more than 8% year-to-date. In 2023, it soared more than 72%. It rose more than 1% this week. SMH 1Y Mountain SMH The ETF’s biggest component over the past year has been chipmaker and artificial intelligence darling Nvidia, which has risen another 24% since the start of 2024. Nvidia’s huge rise follows his impressive 239% rise in 2023. His Nvidia rally last year supported 2023 as the broader market rises into the new year. With this backdrop, CNBC Pro looked into his SMH to find out which chipmakers are overbought. If his RSI for 14 days is above 70, the stock or asset is considered overbought. Readings below 30 may indicate a buying opportunity as the stock may be oversold. Nvidia is the most overbought stock on the list, with a 14-day RSI value of 83.91. The stock has risen nearly 4% since the start of the week on Thursday alone. Analysts are extremely bullish on the stock, with 84% of analysts surveyed by FactSet maintaining a Buy rating. His Nvidia rise over the past year has been fueled by the company’s growing exposure to artificial intelligence. In 2023, the chipmaker became the latest U.S.-listed company to reach a market capitalization of $1 trillion. Broadcom also entered the overbought list with a 14-day RSI value of 71.71. The stock is up about 2% this week, and about 55% of analysts surveyed by FactSet rate it a buy. The stock rose to a one-year high in early December after Citi re-covered the stock and raised its price target. The company pointed to “growth from the strength of its core businesses and the acquisition of VMware.” Other semiconductor stocks on the overbought list include Taiwan Semiconductor and AMD, which are heavyweights in the sector.
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