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Here's How Semiconductor ETFs Are Poised Post Q3 Earnings

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The semiconductor space has struggled over the past three months on bets over persistently higher rates. Now, with signs of the Federal Reserve's aggressive interest rate hiking campaign nearing an end, we are likely to see a reversal of the decline in the sector. The expansion of artificial intelligence (AI) applications holds the promise of ushering in fresh opportunities for growth within the sector.

Additionally, a spate of strong earnings reports from well-known players like Intel (INTC - Free Report) , Texas Instruments (TXN - Free Report) , Lam Research Corporation (LRCX - Free Report) , Advanced Micro Devices (AMD - Free Report) and Qualcomm (QCOM - Free Report) instilled confidence in the sector. However, Texas Instruments (TXN - Free Report) disappointed investors.

As such, the performance of semiconductor ETFs has been good over the past month. VanEck Vectors Semiconductor ETF (SMH - Free Report) , iShares Semiconductor ETF (SOXX - Free Report) and Invesco PHLX Semiconductor ETF (SOXQ - Free Report) gained 3.3%, 0.9% and 1.2%, respectively, while First Trust NASDAQ Semiconductor ETF (FTXL - Free Report) shed just 0.04%.

Let’s dig into the individual performances:

Semiconductor Earnings in Focus

Intel, the world’s largest chipmaker, beat on both the top and the bottom lines and provided an upbeat fourth-quarter revenue guidance. This underscores optimism over the company’s growth prospects. It reported earnings per share of 41 cents, which beat the Zacks Consensus Estimate of 21 cents and increased 11% from the year-ago quarter. Revenues declined 8% year over year to $14.2 billion but came in above the estimated $13.5 billion. The better-than-expected results were driven by a recovery in the personal computers market. For the current quarter, Intel projects revenues in the range of $14.6 billion to $15.6 billion, while earnings per share are expected to be 44 cents (read: Intel Jumps on Q3 Earnings Beat, Upbeat View: ETFs to Buy).

Texas Instruments reported disappointing third-quarter 2023 results, missing our earnings estimate by a penny and revenue estimate by $35 million. For fourth-quarter 2023, the company expects revenues in the range of $3.93-$4.27 billion and earnings per share in the band of $1.35-$1.57.

Lam Research topped revenue and earnings estimates for first-quarter fiscal 2024. Earnings per share of $6.85 surpassed the Zacks Consensus Estimate by 78 cents, while revenues of $3.48 billion edged past the estimated $3.41 billion. For second-quarter fiscal 2024, the company expects revenues of $3.87 billion (+/- $300 million) and earnings per share of $7.00 (+/- 75 cents).

Advanced Micro beat the Zacks Consensus Estimate for earnings by 4 cents and for revenues by $95 million. It expects fourth-quarter 2023 revenues of $6.1 billion (+/-$300 million), which indicates a year-over-year decline of 9% (read: AMD Stock Surges 9% on Upbeat Q3 Earnings: ETFs to Benefit).

At Qualcomm, earnings per share of $1.59 for fourth-quarter fiscal 2023 surpassed the Zacks Consensus Estimate by 14 cents. Revenues of $8.63 billion edged past the estimate of $8.55 billion. The company projects revenues of $9.1-$9.9 billion and earnings per share of $2.25-$2.45 for the first 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 $10 billion and charges 35 bps in annual fees and expenses. The in-focus five firms account for 23% share in the basket.

VanEck Vectors Semiconductor ETF is heavily traded, with a volume of around 8.4 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 five firms collectively making up 30.5% of the assets.

iShares Semiconductor ETF has amassed $8.7 billion in its asset base and trades in a volume of about 820,000 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.

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 five firms collectively make up a combined 33.9% share in the basket.

Invesco PHLX Semiconductor ETF has accumulated $146.5 million in its asset base. It charges 19 bps in annual fees and trades in an average daily volume of 50,000 shares.

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 32 stocks in its basket, with in-focus five firms accounting for a combined 34.4% share.

First Trust Nasdaq Semiconductor ETF has accumulated $1 billion in AUM. The average trading volume is light at around 62,000 shares and the expense ratio is 0.60%. FTXL has a Zacks ETF Rank #1.

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