Very good news for semiconductor ETFs like SOXL, SOXX, and SMH
Top semiconductor ETFs like the Direxion Daily Semiconductor Bull 3x Shares (SOXL), VanEck Semiconductor (SMH), and iShares Semiconductor (SOXX) rebounded in the extended hours after the strong Nvidia earnings and guidance.
SOXL jumped by over 8% in extended hours, while SMH and SOXX rose by 2.8% and 2.70%, respectively. This article explores why these funds are soaring and what to expect.
SOXL, SMH, and SOXX ETFs jump after Nvidia earnings
Top semiconductor ETFs were under pressure in the past few weeks. SOXL ETF was down by over 27%, while SOXX and SMH ETFs were down by nearly 10% from their year-to-date highs.
These ETFs were down because of the ongoing fears of an AI bubble and concerns that the industry was starting to slow.
There fears eased on Wednesday after Nvidia, the biggest company in the world, published strong financial results and issued a robust forward guidance.
Nvidia’s revenue jumped to $57 billion in the third quarter, with Jensen Huang predicting that the growth momentum was continuing. He also adjusted his forward revenue estimate to show that the company will likely make over $65 billion in revenue in the fourth quarter.
This guidance means that the company will likely make over $66 billion in this quarter, as its management is often highly conservative. Analysts were expecting its revenue jumped to $55 billion in the third quarter. Jensen Huang said:
“Blackwell sales are off the charts, and cloud GPUs are sold out. We’ve entered the virtuous cycle of AI. The AI ecosystem is scaling fast — with more new foundation model makers, more AI startups, across more industries, and in more countries.”
Nvidia has also become a highly profitable company, with its net income soaring to $31 billion during the quarter. The EPS soared by 67% to $1.30, higher than what analysts were expecting.
It was easy to predict Nvidia’s strong financial results. As we wrote here, top hyperscalers like Microsoft, Meta Platforms, and Amazon are all continuing their spending. Other companies like CoreWeave, IREN, and Nebius are all accelerating their AI spending.
Nvidia and other semiconductor stocks up
Top semiconductor ETFs like SOXL, SMH, and SOXX are soaring because of the ongoing Nvidia stock surge. Nvidia jumped by over 5% and moved close to $200. This surge triggered gains across other companies in the industry like AMD, which jumped by over 4%, and Intel, which rose by 2.5%.
Other large semiconductor companies like Qualcomm, Applied Materials, Broadcom, Micron, Lam Research, and KLA also continued their strong rally after the Nvidia earnings.
The ongoing rally will likely continue as fears that the AI bubble is about to burst in the near term. Analysts worry that the burst will start to burst once some of the top hyperscalers start to pare back their investments.
Another big worry about Nvidia is that of circular investments. This is a situation where the company invests in companies, which then buy its chips, and boost its stock price. Just this week, Nvidia announced a partnership with Microsoft that will see it invest $45 billion in Anthropic.
This investment valued Anthropic at $350 billion. The hope is that Anthropc will now accelerate its purchase of Nvidia chips. Nvidia has done similar deals with companies like OpenAI and CoreWeave.
Looking ahead, the most likely scenario is where chip stocks like SOXX, SOXL, and SMH continues their uptrend and retests the highest levels this year.
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