Semiconductor exchange traded funds bounced Friday after Applied Materials (NasdaqGS: AMAT) revealed a strong first quarter result that beat estimates on rising smartphone demand.
On Friday, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) gained 3.1%, iShares PHLX Semiconductor ETF (NasdaqGM: SOXX), rose 3.1% and SPDR S&P Semiconductor ETF (NYSEArca: XSD) was up 2.6%. Both SMH and SOXX broke above the their short-term resistance at the 50-day simple moving average.
Meanwhile, the Direxion Daily Semiconductors Bull 3x Shares (NYSEArca: SOXL), which takes the leveraged 300% daily exposure of the PHLX Semiconductor Sector Index, surged 8.8% and ProShares Ultra Semiconductors (NYSEArca: USD), which follows the 200% daily performance of the Dow Jones U.S. Semiconductors Index, surged 6.6% on Friday.
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The semiconductor sub-sector rallied Friday after Applied Materials, the world’s largest supplier of tools used to make semiconductor chips, said it earned $0.34 per share on revenue of $2.45 billion, beating The Street by $0.02 per share and expectations of $2.43 billion in revenue, the Wall Street Pit reports.
AMAT shares gained 11.7% Friday.
The strong results also prompted B. Riley & Co to upgrade AMAT shares to “Buy” from “Neutral.”
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Applied Materials also projected higher-than-expected third-quarter profit on the back of strong demand for chips used in smartphones, notably from an ongoing shift to Organic LED displays, and solid-state drives, reports Rishika Sadam for Reuters.
“In the display area, customers are moving to OLED, particularly in mobile, and that increases our total available market by a factor of three,” Chief Executive Gary Dickerson told Reuters.
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The improving sentiment may foreshadow strength ahead for the overall chip industry as Applied Materials is considered an industry bellwether and the company’s results are viewed as an indicator of health for the industry.
AMAT is among the top components in semiconductor sector-related ETFs, accounting for 4.8% of SMH’s underlying portfolio and 3.9% of SOXX.
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VanEck Vectors Semiconductor ETF