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The semiconductor sector has been badly beaten down in the latest market rout. Investors dumped tech stocks in favor of the sectors poised to benefit big from the rate cut. Also, most stocks in the sector have become overvalued after surging this year on the artificial intelligence (AI) craze.
Additionally, a spate of weaker-than-expected earnings reports from well-known players in the space dampened confidence in the sector.
As such, VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) , Invesco PHLX Semiconductor ETF (SOXQ - Free Report) , First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) and Strive U.S. Semiconductor ETF (SHOC - Free Report) have lost about 21% each in the past month.
Let’s dig into the individual earnings releases:
Semiconductor Earnings in Focus
Intel (INTC - Free Report) , the world’s largest chipmaker, missed estimates on both earnings and revenues and guided a loss for the third quarter. It reported earnings per share of 2 cents, which missed the Zacks Consensus Estimate of 10 cents and declined from the year-ago earnings of 13 cents per share. Revenues dipped 1% year over year to $12.8 billion and fell short of the estimated $12.9 billion. For the current quarter, Intel guided an adjusted loss of 3 cents per share on revenues in the range of $12.5-$13.5 billion (read: Intel Tanks on Big Q2 Earnings Miss: ETFs in Focus).
Texas Instruments (TXN - Free Report) reported solid second-quarter 2024 results. Earnings beat the Zacks Consensus Estimate by 6 cents but revenues lagged the same by $23 million. For the third quarter of 2024, the company expects revenues in the range of $3.94-$4.26 billion and earnings per share in the band of $1.24-$1.48.
Lam Research (LRCX - Free Report) topped revenue and earnings estimates for fourth-quarter fiscal 2024. Earnings per share of $8.14 surpassed the Zacks Consensus Estimate by 62 cents, while revenues of $3.87 billion edged past the estimated $3.81 billion. For first-quarter fiscal 2025, the company expects revenues of $4.05 billion (+/- $300 million) and earnings per share of $8.00 (+/- 75 cents).
Taiwan Semiconductor Manufacturing (TSM - Free Report) reported robust second-quarter 2024 results. The company reported earnings per ADR of $1.48, which outpaced the Zacks Consensus Estimate of $1.37 and improved 36.3% from the year-ago earnings. Revenues rose 40% year over year to $20.8 billion and were above the estimate of $20.2 billion. For the third quarter, the company expects revenues to grow 30%-33% year over year to $22.4-$23.2 billion (read: ETFs in Focus Post TSMC's Q2 Earnings Beat).
Advanced Micro Devices (AMD - Free Report) reported earnings of 50 cents per share, beating the Zacks Consensus Estimate by 3 cents. Revenues of $5.83 billion edged past the consensus mark of $5.71 million. AMD expects third-quarter 2024 revenues of $6.7 billion (+/-$300 million).
At Qualcomm (QCOM - Free Report) , third-quarter fiscal 2024 earnings per share of $2.75 surpassed the Zacks Consensus Estimate by 21 cents. Revenues of $9.4 billion edged past the estimate of $9.2 billion. The company projects revenues of $9.5-$10.3 billion and earnings per share in the range of $2.45-$2.65 for the fourth quarter of fiscal 2024.
VanEck Vectors Semiconductor ETF provides exposure to 26 companies involved in semiconductor production and equipment by tracking the MVIS US Listed Semiconductor 25 Index. It has managed assets worth $20.1 billion and charges 35 bps in annual fees and expenses. The in-focus six firms account for 35.8% share in the basket.
VanEck Vectors Semiconductor ETF is heavily traded, with a volume of around 9 million shares per day. It has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
iShares Semiconductor ETF follows the NYSE Semiconductor Index and offers exposure to U.S. companies that design, manufacture and distribute semiconductors. It holds 30 securities in its basket, with the in-focus six firms collectively making up 24.5% of the assets.
iShares Semiconductor ETF has amassed $13 billion in its asset base and trades in a volume of about 3.7 million shares a day. The product charges a fee of 35 bps a year from investors and has a Zacks ETF Rank #1 with a High risk outlook (read: Are Semiconductor ETFs Better Bets on AI Boom Than Big Techs?).
Invesco PHLX Semiconductor ETF tracks the PHLX Semiconductor Sector Index, holding 30 stocks in its basket. The in-focus six firms collectively make up a combined 26% share in the basket.
Invesco PHLX Semiconductor ETF has accumulated $435.3 million in its asset base. It charges 19 bps in annual fees and trades in an average daily volume of 458,000 shares. SOXQ FTXL has a Zacks ETF Rank #1.
First Trust Nasdaq Semiconductor ETF offers exposure to the most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. FTXL holds 31 stocks in its basket, with in-focus six firms accounting for a combined 22.4% share.
First Trust Nasdaq Semiconductor ETF has accumulated $1.3 billion in AUM. The average trading volume is light at around 38,000 shares and the expense ratio is 0.60%. FTXL has a Zacks ETF Rank #1.
Strive U.S. Semiconductor ETF seeks broad market exposure to the U.S. semiconductor sector. It follows the Bloomberg US Listed Semiconductors Select Total Return Index and holds 32 stocks in its basket, with in-focus firms accounting for a combined 21.3% share.
Strive U.S. Semiconductor ETF has AUM of $69.7 million and charges 40 bps in annual fees. It trades in a volume of 46,000 shares per day on average and has a Zacks ETF Rank #2.
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Semiconductor ETFs Bear the Brunt of Market Rout
The semiconductor sector has been badly beaten down in the latest market rout. Investors dumped tech stocks in favor of the sectors poised to benefit big from the rate cut. Also, most stocks in the sector have become overvalued after surging this year on the artificial intelligence (AI) craze.
Additionally, a spate of weaker-than-expected earnings reports from well-known players in the space dampened confidence in the sector.
As such, VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) , Invesco PHLX Semiconductor ETF (SOXQ - Free Report) , First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) and Strive U.S. Semiconductor ETF (SHOC - Free Report) have lost about 21% each in the past month.
Let’s dig into the individual earnings releases:
Semiconductor Earnings in Focus
Intel (INTC - Free Report) , the world’s largest chipmaker, missed estimates on both earnings and revenues and guided a loss for the third quarter. It reported earnings per share of 2 cents, which missed the Zacks Consensus Estimate of 10 cents and declined from the year-ago earnings of 13 cents per share. Revenues dipped 1% year over year to $12.8 billion and fell short of the estimated $12.9 billion. For the current quarter, Intel guided an adjusted loss of 3 cents per share on revenues in the range of $12.5-$13.5 billion (read: Intel Tanks on Big Q2 Earnings Miss: ETFs in Focus).
Texas Instruments (TXN - Free Report) reported solid second-quarter 2024 results. Earnings beat the Zacks Consensus Estimate by 6 cents but revenues lagged the same by $23 million. For the third quarter of 2024, the company expects revenues in the range of $3.94-$4.26 billion and earnings per share in the band of $1.24-$1.48.
Lam Research (LRCX - Free Report) topped revenue and earnings estimates for fourth-quarter fiscal 2024. Earnings per share of $8.14 surpassed the Zacks Consensus Estimate by 62 cents, while revenues of $3.87 billion edged past the estimated $3.81 billion. For first-quarter fiscal 2025, the company expects revenues of $4.05 billion (+/- $300 million) and earnings per share of $8.00 (+/- 75 cents).
Taiwan Semiconductor Manufacturing (TSM - Free Report) reported robust second-quarter 2024 results. The company reported earnings per ADR of $1.48, which outpaced the Zacks Consensus Estimate of $1.37 and improved 36.3% from the year-ago earnings. Revenues rose 40% year over year to $20.8 billion and were above the estimate of $20.2 billion. For the third quarter, the company expects revenues to grow 30%-33% year over year to $22.4-$23.2 billion (read: ETFs in Focus Post TSMC's Q2 Earnings Beat).
Advanced Micro Devices (AMD - Free Report) reported earnings of 50 cents per share, beating the Zacks Consensus Estimate by 3 cents. Revenues of $5.83 billion edged past the consensus mark of $5.71 million. AMD expects third-quarter 2024 revenues of $6.7 billion (+/-$300 million).
At Qualcomm (QCOM - Free Report) , third-quarter fiscal 2024 earnings per share of $2.75 surpassed the Zacks Consensus Estimate by 21 cents. Revenues of $9.4 billion edged past the estimate of $9.2 billion. The company projects revenues of $9.5-$10.3 billion and earnings per share in the range of $2.45-$2.65 for the fourth quarter of fiscal 2024.
ETFs in Focus
VanEck Vectors Semiconductor ETF (SMH - Free Report)
VanEck Vectors Semiconductor ETF provides exposure to 26 companies involved in semiconductor production and equipment by tracking the MVIS US Listed Semiconductor 25 Index. It has managed assets worth $20.1 billion and charges 35 bps in annual fees and expenses. The in-focus six firms account for 35.8% share in the basket.
VanEck Vectors Semiconductor ETF is heavily traded, with a volume of around 9 million shares per day. It has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
iShares Semiconductor ETF (SOXX - Free Report)
iShares Semiconductor ETF follows the NYSE Semiconductor Index and offers exposure to U.S. companies that design, manufacture and distribute semiconductors. It holds 30 securities in its basket, with the in-focus six firms collectively making up 24.5% of the assets.
iShares Semiconductor ETF has amassed $13 billion in its asset base and trades in a volume of about 3.7 million shares a day. The product charges a fee of 35 bps a year from investors and has a Zacks ETF Rank #1 with a High risk outlook (read: Are Semiconductor ETFs Better Bets on AI Boom Than Big Techs?).
Invesco PHLX Semiconductor ETF (SOXQ - Free Report)
Invesco PHLX Semiconductor ETF tracks the PHLX Semiconductor Sector Index, holding 30 stocks in its basket. The in-focus six firms collectively make up a combined 26% share in the basket.
Invesco PHLX Semiconductor ETF has accumulated $435.3 million in its asset base. It charges 19 bps in annual fees and trades in an average daily volume of 458,000 shares. SOXQ FTXL has a Zacks ETF Rank #1.
First Trust Nasdaq Semiconductor ETF (FTXL - Free Report)
First Trust Nasdaq Semiconductor ETF offers exposure to the most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. FTXL holds 31 stocks in its basket, with in-focus six firms accounting for a combined 22.4% share.
First Trust Nasdaq Semiconductor ETF has accumulated $1.3 billion in AUM. The average trading volume is light at around 38,000 shares and the expense ratio is 0.60%. FTXL has a Zacks ETF Rank #1.
Strive U.S. Semiconductor ETF (SHOC - Free Report)
Strive U.S. Semiconductor ETF seeks broad market exposure to the U.S. semiconductor sector. It follows the Bloomberg US Listed Semiconductors Select Total Return Index and holds 32 stocks in its basket, with in-focus firms accounting for a combined 21.3% share.
Strive U.S. Semiconductor ETF has AUM of $69.7 million and charges 40 bps in annual fees. It trades in a volume of 46,000 shares per day on average and has a Zacks ETF Rank #2.