ETFs
Nvidia Profits Will Boost AI, Semiconductor ETFs
Nvidia Profits Will Boost AI, Semiconductor ETFs
Investors were exasperated last week after the government announced that U.S. inflation was better than expected in April.
But with stocks back at record highs, investors are probably a little nervous heading into arguably the most important earnings report of the first quarter: Nvidia’s.
The AI chipmaker is expected to report first-quarter results on Wednesday after markets close. With the stock up 91% year to date, expectations are a little high.
Any surprises in Nvidia’s report will affect the stock and the 501 U.S.-listed exchange-traded funds that hold it.
Analysts expect Nvidia to report earnings per share of $5.65 and revenue of $24.68 billion for the first quarter.
Matching those numbers may not satisfy the Nvidia bulls. In the fourth quarter, Nvidia beat revenue estimates by 8%, after beating 13% in the previous quarter.
The company will need to beat the consensus estimate for first-quarter sales by $1.5 billion, or 6%, to keep the stock stable post-earnings, according to Susquehanna analyst Chris Rolland.
This “whisper number” is significantly higher than analyst consensus, but the 6% margin is what Nvidia has managed to beat in each of the last four quarters.
Impact of ETFs
How Nvidia shares react to the company’s earnings report could have a major impact on the many ETFs that hold them.
Perhaps no fund is as sensitive to company performance as GraniteShares 1.5x Long NVDA Daily ETF (NVDL), which aims to provide investors with a return one and a half times higher than that of Nvidia’s publicly traded shares. This fund has grown more than five times over the past year as Nvidia’s price has tripled.
Semiconductor exchange-traded funds in particular, such as VanEck Semiconductor ETF (SMH) and the iShares Semiconductor ETF (SOXX)— who hold 21% and 9% of their portfolio in stocks respectively, will be strongly affected.
Artificial intelligence ETFs, such as Roundhill Generative AI and Technology ETF (CHAT)who owns an 11% stake in the stock, will also feel the stock’s fluctuations.
Even big investors in the market may not be able to escape the pull of Nvidia shares on Thursday, the day after the earnings release.
Nvidia currently holds a 5.1% weighting in the SPDR S&P 500 ETF Trust (SPY)making it the third largest stock in the ETF.
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