Semiconductor stocks and ETFs have been rising this year buoyed by the artificial intelligence (AI) frenzy. VanEck Vectors Semiconductor ETF SMH, iShares Semiconductor ETF SOXX, First Trust NASDAQ Semiconductor ETF FTXL and Invesco PHLX Semiconductor ETF SOXQ have gained 22.6%, 21.8%, 17.6% and 21.9%, respectively, over the past three months.
The strong trend is likely to continue in the weeks ahead as the Q2 earnings season picks up pace.
Semiconductors have been the most important drivers of the overall growth in technology, given the use of chips in day-to-day life, from cars to electronic gadgets to planes and weapons. Demand will continue to trend higher, given increased digitization in various corners like healthcare, transport, financial systems, defense, agriculture and retail, among others.
The rapid adoption of cutting-edge technology like cloud, Internet of Things, autonomous cars, gaming, wearables, VR headsets, drones, virtual reality devices, AI, cryptocurrencies, 5G and other advanced information technologies should continue to fuel growth. Further, the introduction of expensive and new-generation chips has led to an enhancement in the product mix for semiconductors.
Some well-known players in the space, such as Intel (INTC), Qualcomm (QCOM), NVIDIA (NVDA) and Advanced Micro Devices (AMD), will report earnings in the coming days. Let’s delve into the financial picture of the companies that have a higher allocation in the above-mentioned ETFs and the power they have to move the funds up or down as Q2 earnings unfold. SMH is largely concentrated on these four firms with a combined share of 33.5%, followed by 27.5% for SOXQ, 26.1% for SOXX and 22% for FTXL.
Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Inside Our Earnings Prediction
Intel has an Earnings ESP of +19.64% and a Zacks Rank #2. The stock saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. Intel delivered an earnings surprise of 10.1%, on average, for the preceding four quarters. It is slated to release earnings after market close on Jul 27.
Qualcomm has an Earnings ESP of 0.00% and a Zacks Rank #3. The company witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 1.05% in the trailing four quarters, on average. The company is slated to report earnings after the closing bell on Aug 2.
NVIDIA has an Earnings ESP of +5.56% and a Zacks Rank #1. It saw a positive earnings estimate revision of a couple of cents over the past 30 days for the quarter to be reported. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The company delivered an earnings surprise of 0.26%, on average, over the past four quarters. Nvidia is slated to report on Aug 23.
Advanced Micro Devices has an Earnings ESP of 0.00% and a Zacks Rank #3. Its earnings surprise history is impressive, with the average beat being 15.53% for the preceding four quarters. The stock witnessed no earnings estimate revision over the past 30 days for the quarter to be reported. AMD is slated to report earnings on Aug 1 after the closing bell.
Conclusion
Though most companies are expected to surprise on earnings this season, semiconductor ETFs might see smooth trading in the weeks ahead as SOXX, SMH and FTXL have a Zacks ETF Rank #1 or 2. This suggests their outperformance in the weeks ahead.
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Semiconductor ETF (SOXX): ETF Research Reports
First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports
Invesco PHLX Semiconductor ETF (SOXQ): ETF Research Reports
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