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Bet on NVIDIA's Solid Q2 With These ETFs

Sweta Killa

After the closing bell yesterday, NVIDIA NVDA cheered investors with strong second-quarter fiscal 2020 results. The graphics processors maker’s both earnings and revenues trumped the Zacks Consensus Estimate. The solid performance suggests that business is back on track with a revival in demand for graphics chips and parts used in data centers. As a result, shares of NVIDIA rose about 7% following the earnings announcement in after-hours trading.

Earnings per share came in at $1.24, beating the Zacks Consensus Estimate by 9 cents but declining from the year-ago quarter of $1.94. Also, revenues dropped 17.4% year over year to $2.58 billion but outpaced the consensus mark of $2.55 billion.

NVIDIA expects revenues of approximately $2.90 billion (+/-2%) for the third quarter of fiscal 2020. While the company has been penetrating newer growth areas, such as data centers, artificial intelligence and self-driving cars, its key business remains selling chips that enhance video game graphics (see: all the Technology ETFs here).

NVIDIA currently has a Zacks Rank #3 (Hold) and an unattractive VGM Score of D. It falls within a bottom-ranked Zacks industry (bottom 39%).

ETFs to Watch

This has put ETFs with higher allocation to this graphics chipmaker under the spotlight. Below we have highlighted some of the funds:

ARK Industrial Innovation ETF ARKQ

This is an actively managed ETF, seeking a long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research related to energy, automation and manufacturing, materials and transportation. This approach results in a basket of 36 stocks with NVDA occupying the third spot holding 8.8% share. The product has accumulated $143.3 million in its asset base and charges 75 bps in fees per year. It sees a lower volume of about 25,000 shares per day.

VanEck Vectors Video Gaming and eSports ETF ESPO

This fund offers exposure to global companies, involved in video game development, e-sports and related hardware and software by tracking the MVIS Global Video Gaming and eSports Index. Holding 25 stocks in its basket, NVIDIA takes the top spot with 9% share. American firms account for one-third of the portfolio while Japan, China and South Korea round off the next three with a double-digit allocation. The fund has gathered $28.9 million in its asset base while trading in average daily volume of 11,000 shares. It charges 55 bps in annual fees from investors (read: 5 Hot ETFs Leading the Wall Street Rebound).

iShares PHLX Semiconductor ETF SOXX

This ETF offers exposure to 30 U.S. companies that design, manufacture and distribute semiconductors by tracking the PHLX SOX Semiconductor Sector Index. Of these, NVDA takes the fourth spot with 7.7% allocation. The fund has amassed $1.4 billion in its asset base and charges a fee of 46 bps a year. It trades in a solid volume of 746,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Make the Most of Positive Trade News With These Sector ETFs).

ARK Web x.0 ETF ARKW

This is an actively managed fund, focusing on companies expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 39 stocks in its basket with NVIDIA occupying the top position at 7%. The ETF has deposited $383.5 million in its asset base and trades in a good average daily volume of around 95,000 shares. Expense ratio comes in at 0.75%.

VanEck Vectors Semiconductor ETF SMH

This ETF has AUM of $1.3 billion and average daily volume of about 7 million shares. The fund provides exposure to 25 global securities by tracking the MVIS US Listed Semiconductor 25 Index. NVIDIA occupies the fifth spot with 5.2% of the assets. While the American firms dominate the fund’s holdings with 76.7% assets, Taiwan (12%), the Netherlands (9.5%) and Switzerland (1.9%) capture the top four slots in terms of its country exposure. The fund charges an expense ratio of 0.35%. It has a Zacks ETF Rank of 2 with a High risk outlook.

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