Semiconductor exchange-traded funds have gained more than 25% this year. Intel Corporation’s (INTC) second-quarter earnings report after today’s close could test whether that rally continues.
Key Takeaways:
- Semiconductor ETFs have surged this year ahead of Intel’s earnings report today.
- Intel’s stock has soared but slid about 28% this month on valuation worries.
- Fund exposure to Intel ranges from about 4% to 6% across the four ETFs.
AI demand for server chips is powering a wave of growth for Intel’s data-center business, according to MarketWatch. However, its consumer computing unit faces a slowdown tied to rising memory prices. Today’s earnings report will show which side of that divide is winning out.
Intel’s data center and AI segment is projected to grow 37.8% to $5.4 billion in the quarter, according to MarketWatch. Its client computing group, which includes PC chips, is expected to grow just 1.7% to $8 billion.
Shares of Intel have gained 178% this year, putting the stock on pace for its best year since 1983. The rally has cooled since June, with shares down about 28% this month, according to Bloomberg. Investors have grown cautious on chipmaker valuations.
See more: VettaFi’s Murphy Discusses Q2 Earnings & Sector Trends on CNBC’s ETF Edge
Demand for server processors has surged as agentic AI leans on central processing units, or CPUs, for inference work. KeyBanc Capital Markets analyst John Vinh projected 25% to 30% server CPU unit growth for Intel, according to Yahoo Finance. He cited expanded manufacturing capacity and rising demand from AI infrastructure deployments.
Rising memory chip prices are pushing computer makers to pull back on entry-level and midrange laptops. That will lead to weaker demand in the back half, Susquehanna analyst Christopher Rolland said, according to MarketWatch.
Intel trades at about 74 times projected earnings, a premium to its 10-year average of 22 times, according to Bloomberg. That multiple ranks among the highest in the semiconductor index, above Nvidia Corp. (NVDA) and Broadcom Inc. (AVGO).
Semiconductor ETF Performance Diverges by Strategy
Four semiconductor ETFs carry exposure to Intel alongside other chipmakers riding the same AI-driven demand. Each fund has climbed this year, though by different margins.
The iShares Semiconductor ETF (SOXX) leads with a year-to-date gain of 84.7% through July 22, according to VettaFi.
The VanEck Semiconductor ETF (SMH) follows at 63%, trailed by the Invesco AI and Next Gen Software ETF (IGPT) at 56.7% and the State Street SPDR NYSE Technology ETF (XNTK) at 26.5%.
All four funds have also fallen over the past month, according to VettaFi. SOXX dropped 15.2%, SMH shed 12.2%, IGPT lost 13% and XNTK fell 9.8% through July 22.
SOXX invests in a modified-cap-weighted basket of 30 U.S.-listed semiconductor companies, according to VettaFi. The fund holds $45.8 billion in assets with a 0.34% expense ratio.
SMH instead weights its portfolio by market capitalization across 25 of the largest U.S.-listed semiconductor companies, according to VettaFi. The fund carries $70.4 billion in assets and a 0.35% expense ratio.
XNTK spreads exposure evenly across 35 U.S.-listed technology-related stocks, according to VettaFi. The fund holds $2.2 billion in assets at a 0.35% expense ratio.
IGPT holds global companies deriving most revenue from software and next-generation technology, according to VettaFi. The fund is the smallest of the group at $1.2 billion in assets, charging 0.56%.
Intel carries different weightings across the four funds. XNTK holds Intel at 6.14%, its largest weighting in the group, according to VettaFi. SOXX holds Intel at 5.37% and IGPT at 4.06%.
SMH does not count Intel among its top 10 holdings. That dilutes the chipmaker’s influence within a portfolio led by Nvidia at 20.78%, according to VettaFi.
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