While the technology segment was dragging down the rest of the markets, ETF investors were quietly funneling more money into the semiconductor sector despite the sell-off.
For example, investors dumped $175 million into the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) on Monday, pushing up total inflows into the ETF to $629 million since Thursday and marking the biggest three-day inflow since April, Bloomberg reports.
In comparison, the widely observed Invesco QQQ Trust (NASDAQ: QQQ) experienced eight days of withdrawals as $3.2 billion was yanked from the ETF.
The disparity between the various tech-related ETF plays reveals the diverging sentiment for some of the highest-flying tech segment and the rest of the industry at large.
Strong earnings out of the chipmakers like Advanced Micro Devices Inc., Xilinx Inc. and Taiwan Semiconductor Manufacturing Co. are bolstering the semiconductor sector outlook, helping the segment stand up against a rout in a broader tech space after the biggest three-day drop since March in response to Facebook Inc.’s user growth miss.
“If they can hold up, it will lower the odds considerably that the other big-cap momentum names will see another leg lower,” Matt Maley, equity strategist at Miller Tabak & Co., told Bloomberg. “Of course, all bets will be off if Apple gives us a lousy earnings report tonight (they’re a huge buyer of chips), but right now, the action in the semis is definitely positive.”
Solid Apple Earnings
Apple posted quarterly revenue of $53.3 billion, an increase of 17 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.34, up 40 percent. International sales accounted for 60 percent of the quarter’s revenue. Apple is the main customer of Taiwan Semiconductor Manufacturing Co.
Half of the components in iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) also rely on Apple for a portion of their revenue. SOXX experienced $129 million in inflows on Monday as well.
“Even though the FAANG complex has been on fire and growing in influence, there are still been plenty of secondary and tertiary Technology names that have not broken down,” Frank Cappelleri, senior equity trader at Instinet LLC, told Bloomberg. “In order for the Growth trade to persist, the Semis must maintain their buoyancy.”
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