Nvidia's Improving Outlook Helps Lift Semiconductor ETFs

Nvidia Corp. (NasdaqGS: NVDA) rallied Thursday after a majority of analysts upgraded the chipmaker in response to the company’s strong quarterly earnings and outlook, lifting semiconductor sector-specific exchange traded funds.

On Thursday, the iShares PHLX Semiconductor ETF (NasdaqGS: SOXX) advanced 0.5%, the VanEck Vectors Semiconductor ETF (SMH) increased 0.7%, and the Invesco PHLX Semiconductor ETF (SOXQ) rose 1.0%.

Meanwhile, Nvidia shares were 3.5% higher. NVDA makes up 9.7% of SMH’s underlying portfolio, 9.4% of SOXQ, and 9.3% of SOXX.

Late Wednesday, Nvidia projected revenue of $6.66 billion to $6.94 billion, above Wall Street estimates. The company attributed the “lion’s share” of the $500 million increase to data-center sales, MarketWatch reports. The increased total followed new records for total, gaming, and data-center sales.

“The data-center story is really coming into its own now, with a sizable inflection in the near term and with prospect for the segment to equal, and potentially exceed, gaming in the not-too-distant future,” Bernstein analyst Stacy Rasgon told MarketWatch.

While “the company is having absolutely no trouble continuing to crush gaming,” Nvidia’s data-center story “still feels like it has some room to run,” Rasgon added.

Many analysts also focused on the demand for graphics processing units, or GPUs, for cryptocurrency mining, which did not make much of an impact on the outlook. The lack of input on the crypto mining side was seen as a relief to analysts, who noted a lower crypto risk as compared with 2018, after a decline in cryptocurrency values caused many miners to cutback on their GPU-powered operations.

Nvidia is also beginning to dabble in sales of Cryptocurrency Mining Processors, or CMPs, which are intended to be more optimized toward cryptocurrency mining and divert would-be miners away from GPUs, which were intended for personal computer gaining.

Nvidia shares strengthened Thursday. 24 analysts upwardly revised their price targets and one lowered theirs, according to FactSet.

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