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Nvidia Tumbles on Fiscal Q2 Revenue Warnings: ETFs in Focus

·4 min read

The graphics chipmaker Nvidia NVDA disappointed investors following the warning of lower second-quarter fiscal 2023 revenues. The warning indicates the latest sign of slackening demand for computer chips.

Shares of NVDA tumbled 6.3% on the day, putting ETFs having the largest allocation to NVIDIA in focus. These include Pacer Data and Digital Revolution ETF TRFK, AI Powered Equity ETF AIEQ, MicroSectors FANG+ ETN FNGS, VanEck Vectors Semiconductor ETF SMH and Global X Robotics & Artificial Intelligence ETF BOTZ.

Nvidia slashed its revenue guidance to $6.70 billion for the fiscal second quarter from the previous forecast of $8.10 billion on weak gaming-chip sales. Notably, gaming revenues dropped 33% from the year-ago level and 44% from the prior quarter. The gaming industry, which is largely considered to be recession-proof, is started to weaken as consumers weigh purchases of discretionary items such as video-game consoles.

Nvidia cited weakening demand for its gaming processors by its channel partners and resellers, noting that the lower sales were likely the result of "macroeconomic headwinds." To counter these challenges, Nvidia "implemented pricing programs," and noted that these challenging market conditions are expected to persist in the third quarter.

The move came after Intel Corp. INTC, Qualcomm QCOM and Sony Group forecast weak sales on demand concerns for personal computers and phones (read: Intel Misses Q2 Earnings Estimate, Cuts View: ETFs in Focus).

ETFs in Focus

Let’s delve into each ETF below:

Pacer Data and Digital Revolution ETF (TRFK)

Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 86 stocks in its basket. Out of these, Nvidia is the top firm, accounting for a 10% share. Semiconductors take the largest share at 31.2%, while system software and communication equipment round off the next two spots.

Pacer Data and Digital Revolution ETF is newly debuted in the space in June and has an expense ratio of 0.60%. It trades in a meager volume of under 500 shares per day on average (read: Time for Semiconductor ETFs on Senate's CHIPS-Plus Bill Passage?).

AI Powered Equity ETF (AIEQ)

With AUM of $120 million, AI Powered Equity ETF is the first actively managed ETF to fully utilize artificial intelligence as a method for stock selection. The ETF applies proprietary analytical algorithms to AI technology, which can process over one million pieces of information per day, to build predictive financial models on approximately 6,000 U.S. companies. AI Powered Equity ETF holds a basket of 141 securities, with Nvidia taking the top spot at 10%.

AI Powered Equity ETF charges 75 bps in annual fees and trades in a lower volume of 8,000 shares per day on average.

MicroSectors FANG+ ETN (FNGS)

MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 equal-weighted stocks in its basket, with Nvidia accounting for a 10% share.

MicroSectors FANG+ ETN has accumulated $59.4 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 37,000 shares and has a Zacks ETF Rank #3 (Hold).

VanEck Vectors Semiconductor ETF (SMH)

VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which tracks the most-liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 25 stocks in its basket, with Nvidia occupying the second position at 8.8% (read: Semiconductor ETFs to Buy Now).  

VanEck Vectors Semiconductor ETF has managed assets worth $7.3 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 4.3 million shares per day and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.

Global X Robotics & Artificial Intelligence ETF (BOTZ)

Global X Robotics & Artificial Intelligence ETF follows the Indxx Global Robotics & Artificial Intelligence Thematic Index, which seeks investment in companies that stand to benefit from the increased adoption and utilization of robotics and AI, including those involved with industrial robotics and automation, non-industrial robots and autonomous vehicles.

Global X Robotics & Artificial Intelligence ETF has 41 stocks in its basket, with NVIDIA occupying the third spot with an 8.7% share. The ETF has AUM of $1.5 billion and an average daily volume of 497,000 shares. It charges 68 bps in annual fees.

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Intel Corporation (INTC) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
Global X Robotics & Artificial Intelligence ETF (BOTZ): ETF Research Reports
AI Powered Equity ETF (AIEQ): ETF Research Reports
MicroSectors FANG ETN (FNGS): ETF Research Reports
Pacer Data and Digital Revolution ETF (TRFK): ETF Research Reports
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