U.S. tech ETFs rallied Thursday after a cooler-than-expected inflation figure dampened Treasury yields, while semiconductor shares were already moving upward in response to strong earnings reported by Micron Technology Inc (NASDAQ:MU).
• VanEck Semiconductor ETF shares are advancing steadily. Why are SMH shares climbing?
The Consumer Price Index in November was lower than expected at 2.7% year-over-year, alleviating concerns of inflation resurgence. Additionally, the core inflation rate softened to 2.6%, which was the lowest since March 2021. This inflation data allowed the 10-year Treasury yield to move closer to 4.11%, providing strong support to long-duration growth assets.
ETFs Tracking Semiconductors Take The Lead
Semiconductors were among the sectors that stood to gain the most. VanEck Semiconductor ETF (NASDAQ:SMH), which tracks a modified market-cap-weighted index of leading chipmakers, has heavy exposure to NVIDIA Corp (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM), and Broadcom Inc (NASDAQ:AVGO)— names highly sensitive to both AI spending trends and interest-rate expectations. The fund was up 2.4% on Thursday at the time of publication.
The iShares Semiconductor ETF (NASDAQ:SOXX), which follows a more diversified and rebalanced index, advanced 3% on Thursday as investors leaned into the view that easing inflation gives the Federal Reserve room to support growth without reigniting price pressures. Micron’s earnings beat reinforced optimism that memory pricing and AI-driven demand are stabilizing, lifting the broader chip complex.
Nasdaq and Growth ETFs Get A Boost
Besides semiconductors, Nasdaq-linked ETFs showed gains on lower yields, which lifted valuations in megacap tech. The Invesco QQQ Trust ETF (NASDAQ:QQQ) has primary exposure to Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT) and Nvidia, and was aided in particular by declining discount rates and the downtrending dollar, which enhances overseas top-line translation.
Growth-oriented funds like the Vanguard Growth Index Fund ETF (NYSE:VUG) also gained traction, reflecting renewed investor appetite for companies with longer-dated cash flows. These ETFs tend to perform better when the effect of inflation dampens and bond yields recede from the earlier trend.
Crowd Risk Lurks Beneath The Rally
Although there is enthusiasm, it should be noted that semiconductor ETFs have recorded unusually large gains in 2025, and this has led to concerns about valuations having little margin to withstand disappointment if inflation figures and earnings trends turn against them. This has led some investors to pair tech-intensive ETFs with equal-weight or low volatility strategies to hedge against downside risk.
Nevertheless, currently, one thing is clear: cooling inflation and reduced yields remain a potent catalyst for tech ETFs, and semiconductors find themselves leading yet another charge.
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