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Why You Should Buy AI & Chip ETFs Post-NVIDIA Earnings
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NVIDIA (NVDA - Free Report) once again reported robust financial results for the first quarter, surpassing Wall Street expectations with significant increases in both earnings per share and revenues. The company also provided an optimistic outlook for the current quarter, projecting revenues to exceed analysts' estimates. Shares gained 9.3% after hours on May 24, 2024, reacting to the earnings results.
Stock Split and Dividend Increase
NVIDIA also announced a 10-to-1 stock split and a substantial increase in its quarterly dividend, reflecting confidence in its financial position and prospects. These measures aim to enhance shareholder value and align with the company's growth trajectory.
High Chip Demand Amid Supply Constraints
NVIDIA CEO Jensen Huang highlighted the unprecedented demand for the company's AI chips, citing a shortage in supply rather than a lack of interest from customers, in an exclusive interview with Yahoo Finance. He highlighted the urgency among data center operators to deploy NVIDIA GPUs to enhance productivity and cost efficiency.
NVIDIA’s Transitioning Between AI Platforms
Despite concerns about a potential slowdown in demand during the transition from NVIDIA's current Hopper AI platform to the more advanced Blackwell system, Huang stated that Hopper orders continued to grow.
This trend highlights the sustained demand for NVIDIA's offerings. Notably, NVIDIA has been recording growth in sales due to its diverse range of customers beyond major cloud service providers, including companies like Meta and Tesla, as well as pharmaceutical firms.
Exploring AI Inference Market
Huang expressed confidence in NVIDIA's position in the AI inference market, citing the complexity of the software stack and models as key factors favoring its offerings. He ruled out concerns about cloud providers developing their own inference chips, asserting NVIDIA's continued dominance in the inference space.
Chip Industry Thriving With Golden Opportunity
Taiwanese contract chipmaker TSMC expects an annual revenue growth of 10% in the global semiconductor industry, excluding memory chips due to AI push. TSMC has estimated that second-quarter sales may rise as much as 30% as it leverages the high demand for semiconductors used in AI applications.
ETFs in Focus
Against this backdrop, below, we highlight a few tech ETF areas that are likely to remain strong no matter what happens in the broader economy and regardless of the Fed’s imminent decision regarding interest rate policy. Agreed, rising rates are negatives for tech companies but the tight Fed policy is less likely to halt AI’s immense growth.
Against the above-mentioned scenario, chip stocks and ETFs are well-positioned due to the high demand they're experiencing. The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund, which has about 25% weight in NVIDIA, charges 35 bps in fees.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
As AI will eventually become an integral part of the economy and will likely drive the broader market, an attention to this ETF makes sense. The underlying Indxx Global Robotics & Artificial Intelligence Thematic Index invests in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
This is another fund that is set to benefit from breakthrough trends in industrial technology. The fund invests in the theme of enterprise digitalization, automation & robotics, AI, environmental focus and decarbonization, photonics and additive manufacturing and space exploration. The fund is heavy on companies like NVIDIA, AMD and Snowflake — all the big AI beneficiaries.
Per NVIDIA’s Huang, the automotive industry is an important consumer of the company's data-center chips, particularly in the advancement of self-driving technology. He believes that, over the long term, the broader auto industry will thrive on automation. This very comment puts focus on ETF CARZ.
First Trust NASDAQ Technology Dividend ETF (TDIV - Free Report)
The ETF includes up to 100 Technology and Telecommunications companies that pay a regular or common dividend. While this fund doesn’t have a direct correlation with NVIDIA, its huge focus on other tech giants and tech companies’ recent inclination toward dividend distribution makes it a lucrative bet. Notably, NVIDIA announced a substantial increase in its quarterly dividend. Meta and Alphabet also announced the first-ever dividend this year.
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Why You Should Buy AI & Chip ETFs Post-NVIDIA Earnings
NVIDIA (NVDA - Free Report) once again reported robust financial results for the first quarter, surpassing Wall Street expectations with significant increases in both earnings per share and revenues. The company also provided an optimistic outlook for the current quarter, projecting revenues to exceed analysts' estimates. Shares gained 9.3% after hours on May 24, 2024, reacting to the earnings results.
Stock Split and Dividend Increase
NVIDIA also announced a 10-to-1 stock split and a substantial increase in its quarterly dividend, reflecting confidence in its financial position and prospects. These measures aim to enhance shareholder value and align with the company's growth trajectory.
High Chip Demand Amid Supply Constraints
NVIDIA CEO Jensen Huang highlighted the unprecedented demand for the company's AI chips, citing a shortage in supply rather than a lack of interest from customers, in an exclusive interview with Yahoo Finance. He highlighted the urgency among data center operators to deploy NVIDIA GPUs to enhance productivity and cost efficiency.
NVIDIA’s Transitioning Between AI Platforms
Despite concerns about a potential slowdown in demand during the transition from NVIDIA's current Hopper AI platform to the more advanced Blackwell system, Huang stated that Hopper orders continued to grow.
This trend highlights the sustained demand for NVIDIA's offerings. Notably, NVIDIA has been recording growth in sales due to its diverse range of customers beyond major cloud service providers, including companies like Meta and Tesla, as well as pharmaceutical firms.
Exploring AI Inference Market
Huang expressed confidence in NVIDIA's position in the AI inference market, citing the complexity of the software stack and models as key factors favoring its offerings. He ruled out concerns about cloud providers developing their own inference chips, asserting NVIDIA's continued dominance in the inference space.
Chip Industry Thriving With Golden Opportunity
Taiwanese contract chipmaker TSMC expects an annual revenue growth of 10% in the global semiconductor industry, excluding memory chips due to AI push. TSMC has estimated that second-quarter sales may rise as much as 30% as it leverages the high demand for semiconductors used in AI applications.
ETFs in Focus
Against this backdrop, below, we highlight a few tech ETF areas that are likely to remain strong no matter what happens in the broader economy and regardless of the Fed’s imminent decision regarding interest rate policy. Agreed, rising rates are negatives for tech companies but the tight Fed policy is less likely to halt AI’s immense growth.
VanEck Semiconductor ETF (SMH - Free Report)
Against the above-mentioned scenario, chip stocks and ETFs are well-positioned due to the high demand they're experiencing. The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund, which has about 25% weight in NVIDIA, charges 35 bps in fees.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
As AI will eventually become an integral part of the economy and will likely drive the broader market, an attention to this ETF makes sense. The underlying Indxx Global Robotics & Artificial Intelligence Thematic Index invests in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
Spear Alpha ETF (SPRX - Free Report)
This is another fund that is set to benefit from breakthrough trends in industrial technology. The fund invests in the theme of enterprise digitalization, automation & robotics, AI, environmental focus and decarbonization, photonics and additive manufacturing and space exploration. The fund is heavy on companies like NVIDIA, AMD and Snowflake — all the big AI beneficiaries.
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report)
Per NVIDIA’s Huang, the automotive industry is an important consumer of the company's data-center chips, particularly in the advancement of self-driving technology. He believes that, over the long term, the broader auto industry will thrive on automation. This very comment puts focus on ETF CARZ.
First Trust NASDAQ Technology Dividend ETF (TDIV - Free Report)
The ETF includes up to 100 Technology and Telecommunications companies that pay a regular or common dividend. While this fund doesn’t have a direct correlation with NVIDIA, its huge focus on other tech giants and tech companies’ recent inclination toward dividend distribution makes it a lucrative bet. Notably, NVIDIA announced a substantial increase in its quarterly dividend. Meta and Alphabet also announced the first-ever dividend this year.