After the closing bell yesterday, NVIDIA NVDA) disappointed investors with its second-quarter fiscal 2019 results. Though the biggest maker of graphics processors beat the Zacks Consensus Estimate for both the top and the bottom lines, it provided bleak revenue guidance for the ongoing quarter, citing sudden decline in cryptocurrency-mining sales.
Shares of NVDA dropped as much as 6.4% in aftermarket hours.
Q2 Earnings in Detail
Earnings per share came in at $1.94, crushing the Zacks Consensus Estimate by a dime and improving 92% from the year-ago quarter. Revenues climbed 40% year over year to $3.12 billion and edged past the estimate of $3.11 billion. The performance was powered by a boom in the datacenter and gaming business lines.
Datacenter revenues jumped 83% to $760 million, while gaming sales climbed 52% to $1.8 billion. Notably, gaming remains the company's biggest moneymaker and the largest segment, accounting for about 58% of total revenues.
For the third quarter of fiscal 2019, NVIDIA expects revenues of approximately $3.25 billion (+/-2%). This is much lower than the Zacks Consensus Estimate of $3.37 billion. The company warned that the extra boost in revenues from selling its graphics chips to cryptocurrency miners appears to be over at least for now. This is because the chipmaker previously projected cryptocurrency-specific products to contribute around $100 million in revenue during the fiscal second-quarter, but these products raked in revenues of just $18 million due to greater-than-expected drop in demand for chips used by cryptocurrency miners. As a result, the company now projects no contributions from cryptocurrency going forward (read: Bitcoin Falls After SEC Postpones ETF Decision).
However, data center and gaming business will continue to grow as both the data center graphics processing unit market and gaming GPU market expands. Currently, NVIDIA has a Zacks Rank #3 (Hold) and a Growth Score of A. Additionally, it falls in a top-ranked Zacks Industry (top 14%), suggesting that a dip could be a solid buying opportunity.
ETFs in Focus
Given this, investors seeking to bet with lower risk could invest in ETFs that have a higher allocation to this graphics chipmaker. Below we have highlighted some of them:
iShares PHLX Semiconductor ETF (SOXX - Free Report)
This ETF offers exposure to 30 U.S. companies that design, manufacture and distribute semiconductors by tracking the PHLX SOX Semiconductor Sector Index. Out of these, NVDA takes the second spot with 8.4% allocation. The fund has amassed $1.7 billion in its asset base and charges a fee of 47 bps a year. It trades in a solid volume of 750,000 shares and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook (read: Semiconductor ETFs to Tap Intel's Dip Post Q2 Earnings).
Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report)
This product seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and AI, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles. It tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index and holds 37 stocks in its basket with NVIDIA taking the third position with 6.9% allocation. BOTZ has AUM of $2.2 billion and trades in solid average daily volume of more than a million shares. It charges 68 bps in annual fees (read: Move Over FANGs, FinTech ETF is Hot Now).
VanEck Vectors Semiconductor ETF (SMH - Free Report)
This ETF has AUM of $956.9 million and average daily volume of about 6 million. The fund provides exposure to 25 global securities by tracking the MVIS US Listed Semiconductor 25 Index. NVIDIA occupies the third spot with 6.1% of the assets. While American firms dominate the fund’s holdings with 81% assets, the Netherlands (9.2%), Taiwan (9.2%), and Switzerland (0.7%) round off the top four in terms of country exposure. The fund charges an expense ratio of 0.35%. It has a Zacks ETF Rank #2 with a High risk outlook (read: What's in Store for Chip ETFs in Q2 Earnings?).
Invesco DWA Technology Momentum ETF (PTF - Free Report)
This fund follows the Dorsey Wright Technology Technical Leaders Index and provides exposure to companies that are showing relative strength (momentum). Holding 43 stocks in the basket, NVIDIA occupies the third position accounting for 5.8% share. The product is illiquid and unpopular with AUM of $144.9 million and average daily volume of 8,000 shares. It charges 60 bps in annual fees and has a Zacks ETF Rank #1 with a High risk outlook.
Invesco Dynamic Semiconductors ETF (PSI - Free Report)
This fund tracks the Dynamic Semiconductor Intellidex Index, which evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. It holds 30 securities in the basket, with NVIDIA occupying the second position, holding 5.3% of assets. PSI has AUM of $299.5 million and charges 63 bps in annual fees. It trades in volume of 62,000 shares per day on average and has a Zacks ETF Rank #1 with a High risk outlook.
AdvisorShares New Tech and Media ETF
This is an actively managed ETF designed to invest in companies that are driving economic growth in the modern era, and can adapt to changing leadership by maintaining the ability to invest in the next generation of technology and media companies leading the equity markets. It seeks to provide a similar return stream to the performance of technology and media equity leaders as characterized by the FANG stocks acronym. This approach results in a basket of 20 stocks with NVIDIA occupying the sixth position, holding 5.2% share. FNG has amassed $45.7 million in its asset base and comes with a high expense ratio of 0.85%. Volume is light at 30,000 shares (read: Explore FANG+ With These New ETFs).
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