Semiconductor sector-related ETFs were among the best performers Friday on optimism over U.S.-China trade talks and Broadcom (NasdaqGS: AVGO) impressive fourth quarter earnings results.
Among the best performing non-leveraged ETFs of Friday, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) increased 2.9%, iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) advanced 3.0% and Invesco Dynamic Semiconductors ETF (NYSEArca: PSI) gained 2.5%.
Lifting the semiconductor segment, Broadcom revealed net income of $471 million or $1.12 per share on revenue of $5.79 billion, compared to $5.33 billion a year ago. The company also claimed quarterly earnings of $5.55 per share, compared to $5.12 per share a year ago and analyst expectations of an adjusted $5.22 per share, according to FactSet.
Chief Executive Hock Tan also provide a more optimistic outlook, arguing that the semiconductor downturn may have bottomed out.
“We expect our semiconductor business to bottom in the second fiscal quarter driven almost entirely by the seasonal drop in Wireless. But looking to H2, we are confident the semiconductor business will resume very meaningful growth,” Tan said in a conference call.
Tan’s call also mirrored those of executives like Microchip Technology Inc. CEO Steve Sanghi whom called a bottom last week.
AVGO shares gained 7.6% Friday. AVGO makes up 8.8% of SOXX’s underlying holdings, 5.7% of SMH and 5.4% of PSI.
Further fueling the rally in the tech segment, China’s state-run news agency said Washington and Beijing were making further progress on trade talks, Reuters reports. The announcement came as a relief after news that a deal between the two sides will not happen at the end March.
Chipmakers, which have a large exposure to China, also rose on the trade update.
“Chipmakers are greatly linked to China, so when we have positive news out of semiconductor space it is a reaffirmation that the fundamentals of tech are still strong,” Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management, told Reuters.
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