Semiconductor ETFs Dip Before Nvidia's Strong Earnings

Stocks retreated Wednesday, with major ETFs closing lower ahead of Nvidia’s highly anticipated earnings report. 

The SPDR S&P 500 ETF Trust (SPY) fell 0.6%, while the tech-heavy Invesco QQQ Trust (QQQ) dropped 1.1%. 

The SPDR Dow Jones Industrial Average ETF Trust (DIA) also declined 0.4%. Nvidia’s stock closed 2.1% lower before its after-hours earnings release, pulling down U.S. semiconductor ETFs. ProShares Ultra Semiconductors (USD) closed down 4.1%, while the Simplify Volt RoboCar Disruption and Tech ETF (VCAR) fell 2.8%. 

Other chip-focused funds also felt the pressure. The iShares Semiconductor ETF (SOXX) declined 1.8%, and the Strive U.S. Semiconductor ETF (SHOC) slid 1.5%. 

After the bell, Nvidia provided a bright spot, reporting 122% revenue growth driven by surging demand for data center chips. The company also announced a $50 billion stock buyback program. Nvidia forecast third-quarter revenue of $32.5 billion, plus or minus 2%, well above Wall Street’s estimates of $31.77 billion.

The VanEck Semiconductor ETF (SMH) was down 1.5% in midday trading, indicating investor caution ahead of what some analysts say may be the biggest event of the week for the stock market.

Nvidia (NVDA), the largest component of SMH, reports its Q2 earnings today after the close.

NVDA is a top holding in not just semiconductor and tech sector ETFs, but also widely held funds like the SPDR S&P 500 ETF Trust (SPY).

SMH is up nearly 10% since the Aug. 5 broad market dip, and Nvidia will need to exceed market expectations this afternoon for the semiconductor ETF to see further share appreciation like it did after previous earnings calls.

For example, SMH shares surged nearly 20% in the month following Nvidia's May earnings report as investors cheered news of a stock split, along with the firm topping analysts’ sales and earnings estimates.