The iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) stock prices will be in the spotlight after the latest Nvidia earnings. The two ETFs have jumped by more than 45% from the lowest level in November last year.
One of the big stories in the technology industry is the slow growth of the semiconductor sectors as PC sales have retreaated. Recent data shows that PC sales are yet to recover since most people already bought their computers during the Covid-19 pandemic.
A recent stody by Gartner showed that worldwide PC sales dropped by 30% in the first quarter to 55.2 million. The biggest sellers of PCs in that period were Lenovo, HP, Dell, and Apple. The report said that the sector will continue easing in the coming months.
In a statement on Wednesday, Lenovo said that it expects PC sales to be gradual. He expects that volume will recover in the fourth quarter. This is important since most semiconductor companies like Nvidia, AMD, and Intel sell to PC makers.
The other key concern among semiconductor companies is that the data center industry is also slowing. Most companies like Intel and AMD have shown that revenue in the data center segment has been falling in the past few quarters.
Despite all this, the SOXX and SMH ETFs will likely continue rising as semiconductor companies pivot to artificial intelligence. As I predicted in this articleon Wednesday, Nvidia’s results showed that the company’s business did well in the first quarter. It has become one of the best-performing AI stocks this year.
Still, the iShares Semiconductor and VanEck Semiconductor ETFs have some glaring risks. The most important is valuation. Nvidia’s valuation is set to hit over $1 trillion even after its revenue hit $26.9 billion in 2022. There are also concerns about the rising tensions between the US and China.
Recently, China banned Micron from its key products. Further, there concerns about an upcoming glut in the semiconductor industry as countries invest in the sector.
Historically, the SOXX and SMH ETFs move in sync since they both track the same companies. Looking at the daily chart, we see that the SOXX ETF has been in a strong bullish trend in the past few months. It jumped to a high of $448.90 after Nvidia’s results. This was an important price since it was along the 61.8% Fibonacci Retracement level.
SOXX ETF has invalidated the double-top pattern that was forming. It has moved above the 25-day and 50-day exponential moving averages. Therefore, the outlook of the semiconductor ETF is bullish, with the next level to watch being at $500.
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