Chip ETFs Seesaw After Nvidia Hits Record Highs
Nvidia powered gains in chip ETFs, while ASML weighed them down.
Shares of semiconductor ETFs have been on a wild ride this week as AI enthusiasm collides with weakness in other parts of the chip industry.
On Monday, shares of AI chip giant Nvidia notched its first record closing high in four months, pushing its year-to-date gain to 179%, while fueling a massive 400% return for the GraniteShares 2x Long NVDA Daily ETF (NVDL).
Semiconductor ETFs, like the VanEck Semiconductor ETF (SMH), which has a 21% weighting in Nvidia, and the iShares Semiconductor ETF (SOXX), which has a 9% position in the stock, extended their year-to-date gains to 50% and 25%, respectively.
While Nvidia was hitting records on Monday, NVDL, SMH and SOXX remained anywhere from 7% to 13% below their June all-time highs.
In the case of NVDL, decay associated with Nvidia’s summertime volatility weighed a bit on its recent returns, while SMH and SOXX were hampered by lagging performance in other chip stocks versus Nvidia.
ASML's Earnings Sag
The contrast between the fortunes of Nvidia and the rest of the chip sector were on full display on Tuesday when Dutch chip equipment maker ASML announced weak earnings results.
“While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected,” CEO Christophe Fouquet said.
ASML has a 5% weighting in SMH and a 3.5% weighting in SOXX, but its weakness spread across the chip sector, pressuring most semiconductor stocks, including Nvidia, which fell as much as 6.8% on Tuesday.
Still, momentum for Nvidia and the ETFs which hold large positions in the stocks remains strong as all signs continue to point to robust demand for the company’s AI chips, and particularly, its new line of Blackwell chips that are starting to ship this quarter.
Nvidia CEO Jensen Huang recently said that demand for Blackwell was “insane,” while analysts at Morgan Stanley have noted that the chips are sold out through the next year.
