Rising Short Interest in Semi Stocks Could Mean Trouble for Semiconductor ETF

semiconductor-microchipThe VanEck Vectors Semiconductor ETF (NYSE:SMH) has surged more than 25% this year, but rising short interest in semiconductor stocks could signal an impending pullback.

Nasdaq recently released the latest short interest data for the August 15 settlement date, and several prominent semiconductor stocks saw significant gains in bearish bets.

The largest semiconductor company in the world, Intel Corp. (INTC), saw its short interest rise increase to 75.47 million shares, up from a prior level of 66.39 million. That 13.67% rise in short interest was the highest gain among all semiconductor names in the latest period.

Intel represents nearly 16% of the total holdings within SMH, so an INTC pullback would have a large effect on the ETF.

SMH – Top Holdings

QUALCOMM, Inc. (QCOM), which is SMH’s third largest holding at 8.7%, also saw its short interest grow to 21.43 million shares in the latest period, up from 20.92 million.

Other semiconductor names to see short interest grow recently were Applied Materials Inc. (AMAT) (14.62 million shares vs. 12.86 million) and Micron Technology (MU) (77.14 million shares vs. 74.12 million).

It remains to be seen if the elevated short interest in these names will put downside pressure on their share prices, but investors in these individual stocks — as well as ETFs that have large exposure to them — might find it useful to monitor the situation.

SMH-2016-09-27

So far today, the higher short interest in semi stocks isn’t affecting SMH. Those shares rose $0.63 (+0.95%) to $67.00 in Tuesday morning trading. The largest semiconductor-focused ETF currently has about $567 million in assets under management, and is the fourth best performing fund in the Technology Equities category this year.