The semiconductor sector was hit hard by the recent market crash as investors dumped tech stocks into sectors expected to benefit most from lower interest rates, and most stocks in the sector are overvalued after soaring this year on the artificial intelligence boom.
Additionally, a series of disappointing earnings reports from well-known companies in the industry have undermined confidence in the sector.
As a result, the VanEck Vectors Semiconductor ETF SMH, iShares Semiconductor ETF SOXX, Invesco PHLX Semiconductor ETF SOXQ, First Trust NASDAQ Semiconductor ETF FTXL and Strive US Semiconductor ETF SHOC have each fallen about 21% over the past month.
Let’s take a closer look at each individual earnings announcement.
Focus on semiconductor revenues
Intel INTC, the world’s largest chipmaker, missed expectations on both earnings and revenue and forecast a third-quarter loss. The company reported earnings per share of 2 cents, below the Zacks Consensus Estimate of 10 cents and down from earnings per share of 13 cents in the year-ago quarter. Revenues fell 1% year-over-year to $12.8 billion, missing the estimate of $12.9 billion. For the current quarter, Intel forecast an adjusted loss per share of 3 cents and revenue of $12.5 to $13.5 billion (see “Intel’s Q2 Profit Plunges as Demand Drops: Watch the ETFs”).
Texas Instruments (TXN) reported strong second-quarter 2024 earnings. Earnings beat the Zacks Consensus Estimate by 6 cents, but revenue missed the estimate by $23 million. The company expects third-quarter 2024 revenue of $3.94 billion to $4.26 billion and earnings per share in the range of $1.24 to $1.48.
Lam Research LRCX beat revenue and earnings expectations for the fourth quarter of fiscal 2024. Earnings per share of $8.14 beat the Zacks Consensus Estimate by 62 cents, and revenue of $3.87 billion slightly beat the estimate of $3.81 billion. For the first quarter of fiscal 2025, the company expects revenue of $4.05 billion (+/- $300 million) and earnings per share of $8.00 (+/- 75 cents).
Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) reported strong financial results for the second quarter of 2024. The company reported earnings per ADR of $1.48, beating the Zacks Consensus Estimate of $1.37 and up 36.3% year over year. Revenues increased 40% year over year to $20.8 billion, beating the estimate of $20.2 billion. For the third quarter, the company expects revenues to increase 30% to 33% year over year to $22.4 to $23.2 billion (ETF notable for TSMC beating second quarter revenue estimates).
Advanced Micro Devices (AMD) reported earnings of 50 cents per share, beating the Zacks Consensus Estimate by 3 cents. Revenues of $5.83 billion slightly beat the consensus estimate of $5.71 million. AMD expects third-quarter 2024 revenues of $6.7 billion (+/- $300 million).
Qualcomm (QCOM) reported third-quarter fiscal 2024 earnings per share of $2.75, beating the Zacks Consensus Estimate by 21 cents. Revenues of $9.4 billion slightly beat the $9.2 billion estimate. The company expects fourth-quarter fiscal 2024 revenues of $9.5 to $10.3 billion and earnings per share in the range of $2.45 to $2.65.
The story continues
Featured ETFs
VanEck Vectors Semiconductor ETF (SMH)
The VanEck Vectors Semiconductor ETF provides exposure to 26 companies involved in semiconductor manufacturing and equipment by tracking the MVIS U.S. Exchange-Listed Semiconductor 25 Index. It has $20.1 billion in assets under management and annual fees and expenses of 35 basis points. The six featured companies make up 35.8% of the basket.
VanEck Vectors Semiconductor ETF has a high trading volume of about 9 million shares trading daily, a Zacks ETF Rank #1 (Strong Buy) and a Risk Outlook of High.
iShares Semiconductor ETF (SOXX)
The iShares Semiconductor ETF tracks the NYSE Semiconductor Index and provides exposure to U.S. companies that design, manufacture, or sell semiconductors. The basket includes 30 stocks, with six featured companies making up 24.5% of assets.
The iShares Semiconductor ETF has accumulated an asset base of $13 billion and trades about 3.7 million shares per day. The product charges investors an annual fee of 35 bps and earns a #1 ranking in the Zacks ETF Rank for High Risk Outlook (see “Is a Semiconductor ETF a Better Way to Bet on the AI Boom Than Big Tech Companies?”).
Invesco PHLX Semiconductor ETF (SOXQ)
The Invesco PHLX Semiconductor ETF tracks the PHLX Semiconductor Sector Index and holds 30 stocks in its basket, with the six companies featured making up a combined share of 26% of the basket.
Invesco PHLX Semiconductor ETF has an asset base of $435.3 million, charges annual fees of 19 bps and trades an average daily volume of 458,000 shares. SOXQ FTXL sits at #1 in the Zacks ETF Rank.
First Trust Nasdaq Semiconductor ETF (FTXL)
First Trust Nasdaq Semiconductor ETF provides exposure to the most liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq U.S. Smart Semiconductor Index. FTXL holds 31 stocks, with six featured companies accounting for a combined share of 22.4%.
First Trust Nasdaq Semiconductor ETF has total assets under management of $1.3 billion, low average trading volume of around 38,000 shares and an expense ratio of 0.60%. FTXL sits at #1 in the Zacks ETF Rank.
Strive US Semiconductor ETF (SHOC)
Strive US Semiconductor ETF seeks broad-market exposure to the U.S. semiconductor sector. It tracks the Bloomberg U.S. Exchange-Listed Semiconductor Select Total Return Index and includes 32 stocks in its basket, with shares of focal companies totaling 21.3%.
Strive US Semiconductor ETF has $69.7 million in assets under management, charges annual fees of 40 bps, trades an average of 46,000 shares per day and earns a Zacks ETF Rank of #2.
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Intel Corporation (INTC) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company (TSM): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Report
iShares Semiconductor ETF (SOXX): ETF Research Report
First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Report
Invesco PHLX Semiconductor ETF (SOXQ): ETF Research Report
Strive US Semiconductor ETF (SHOC): ETF Research Report
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