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The technology ETF The Technology Select Sector SPDR Fund (XLK - Free Report) lost 0.9% on Aug. 29, 2024, although the Dow Jones Industrial Average closed at a new all-time high, marking its third record this week. The index gained more than 200 points, setting a new benchmark.
In contrast, the Nasdaq Composite and S&P 500 finished lower on the day, with the Nasdaq dropping about 0.2% and the S&P 500 closing flat. This divergence came as investors assessed NVIDIA's (NVDA - Free Report) earnings which failed to cheer up investors. NVDA shares were down 6.4% on Aug. 29, 2024, and also slumped 6.6% in the past five days. Similarly, the key tech ETF XLK is down 2.3% in the past five days.
In this article, we would highlight what led to this tech rout and which tech ETFs survived this turmoil. Let’s find out.
Why NVDA Shares Slumped Despite Both Line Beats
Nvidia's earnings report, despite recording impressive growth, failed to meet the high expectations that had fueled its recent rally. The AI chipmaker's quarterly profit and revenue guidance topped estimates, but the magnitude of the beats fell short of the lofty hopes surrounding the stock.
For the third quarter of fiscal 2025, NVIDIA anticipates revenues of $32.5 billion (+/-2%), higher than the Zacks Consensus Estimate of $30.97 billion. Such almost in-line guidance also muted investors’ optimism.
NVIDIA’s Blackwell Delay
During its second-quarter earnings conference call, NVIDIA revealed that it has executed a change to the Blackwell GPU mask to improve production yield. It is expected to start ramping up the production of Blackwell in the fourth quarter of fiscal 2025 and continue through fiscal 2026.
Earlier, NVIDIA stated that the ramp-up of Blackwell production will begin in 2024. Blackwell delay is another drag on the NVDA stock as NVIDIA’s next-generation Blackwell chip delays may impact major clients like Microsoft and Google.
Delayed AI Payoffs
In any case, the tech space has been showcasing subdued performance this earnings reporting cycle as many tech biggies have indicated delayed payoffs in artificial intelligence (AI) investments. So, investors remained in two minds before getting overly enthusiastic about renewed AI trades.
Having said that, we would like to note that the basic AI is in fine fettle. After all, NVDA CEO Jensen Huang hinted at strong demand for Blackwell platforms and anticipated continued growth in NVIDIA’s data center business. At maximum, we can see a slowdown in growth, which is a part of every business cycle.
Technology ETFs That Survived This Turmoil
Against the above-mentioned backdrop, below we highlight a few technology equities ETFs that gained over the past week.
Amplify Mobile Payments ETF (IPAY - Free Report) – Up 2.8% past week
SPDR S&P Software & Services ETF (XSW - Free Report) – Up 1.4% past week
BlackRock Future Financial and Technology ETF (BPAY) – Up 0.7% past week
Global X Cloud Computing ETF (CLOU - Free Report) – Up 0.6% past week
ALPS Disruptive Technologies ETF (DTEC - Free Report) – Up 0.7% past week
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Tech ETFs That Won Amid NVIDIA-Led Tech Rout
The technology ETF The Technology Select Sector SPDR Fund (XLK - Free Report) lost 0.9% on Aug. 29, 2024, although the Dow Jones Industrial Average closed at a new all-time high, marking its third record this week. The index gained more than 200 points, setting a new benchmark.
In contrast, the Nasdaq Composite and S&P 500 finished lower on the day, with the Nasdaq dropping about 0.2% and the S&P 500 closing flat. This divergence came as investors assessed NVIDIA's (NVDA - Free Report) earnings which failed to cheer up investors. NVDA shares were down 6.4% on Aug. 29, 2024, and also slumped 6.6% in the past five days. Similarly, the key tech ETF XLK is down 2.3% in the past five days.
In this article, we would highlight what led to this tech rout and which tech ETFs survived this turmoil. Let’s find out.
Why NVDA Shares Slumped Despite Both Line Beats
Nvidia's earnings report, despite recording impressive growth, failed to meet the high expectations that had fueled its recent rally. The AI chipmaker's quarterly profit and revenue guidance topped estimates, but the magnitude of the beats fell short of the lofty hopes surrounding the stock.
For the third quarter of fiscal 2025, NVIDIA anticipates revenues of $32.5 billion (+/-2%), higher than the Zacks Consensus Estimate of $30.97 billion. Such almost in-line guidance also muted investors’ optimism.
NVIDIA’s Blackwell Delay
During its second-quarter earnings conference call, NVIDIA revealed that it has executed a change to the Blackwell GPU mask to improve production yield. It is expected to start ramping up the production of Blackwell in the fourth quarter of fiscal 2025 and continue through fiscal 2026.
Earlier, NVIDIA stated that the ramp-up of Blackwell production will begin in 2024. Blackwell delay is another drag on the NVDA stock as NVIDIA’s next-generation Blackwell chip delays may impact major clients like Microsoft and Google.
Delayed AI Payoffs
In any case, the tech space has been showcasing subdued performance this earnings reporting cycle as many tech biggies have indicated delayed payoffs in artificial intelligence (AI) investments. So, investors remained in two minds before getting overly enthusiastic about renewed AI trades.
Having said that, we would like to note that the basic AI is in fine fettle. After all, NVDA CEO Jensen Huang hinted at strong demand for Blackwell platforms and anticipated continued growth in NVIDIA’s data center business. At maximum, we can see a slowdown in growth, which is a part of every business cycle.
Technology ETFs That Survived This Turmoil
Against the above-mentioned backdrop, below we highlight a few technology equities ETFs that gained over the past week.
Amplify Mobile Payments ETF (IPAY - Free Report) – Up 2.8% past week
SPDR S&P Software & Services ETF (XSW - Free Report) – Up 1.4% past week
BlackRock Future Financial and Technology ETF (BPAY) – Up 0.7% past week
Global X Cloud Computing ETF (CLOU - Free Report) – Up 0.6% past week
ALPS Disruptive Technologies ETF (DTEC - Free Report) – Up 0.7% past week