Semiconductor stocks and sector-related ETFs bounced back Friday after Intel (NasdaqGS: INTC) revealed better-than-expected earnings for the fourth quarter.
The iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) rose 2.5% and the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) gained 2.5% while INTC shares surged 9.5% on Friday. INTC makes up 7.7% of SOXX’s underlying portfolio and is the largest component of SMH at 10.3%.
More risk-tolerant traders betting on quick near-term gains for semiconductor stocks also capitalized on the Direxion Daily Semiconductors Bull 3x Shares (NYSEArca: SOXL), which takes the leveraged 300% daily exposure of the PHLX Semiconductor Sector Index, and the ProShares Ultra Semiconductors (NYSEArca: USD), which follows the 200% daily performance of the Dow Jones U.S. Semiconductors Index. On Friday, SOXL increased 7.0% and USD advanced 6.3%. INTC accounts for 8.4% of SOXL and 18.6% of USD.
Intel shares bounced back to dotcom-era highs after revealing that the chipmaker’s shift to higher-margin data-center businesses has been a winning decision as the PC market slows, Reuters reports.
The semiconductor company has shifted its focus to making chips for data centers to offset revenue loss over the years as falling PC demand has diminished its once blockbuster business that grew on the rise of the PC industry.
“Intel is successfully navigating the transition from a PC-centric to data-centric company – specifically, Intel’s data-centric businesses now comprise about 47 percent of revenue,” Credit Suisse analyst John Pitzer told Reuters, upgrading the stock to “outperform” from “neutral.”
Intel projects its data centric unit to grow mid-teens and PC centric business in the low single digits this year, with overall revenue growth of 4% to $65 billion.
“While we believe near term PC unit declines have been impacted by a lengthening in the PC refresh cycle, we view this lengthening as slowing over time, lessening the deleterious impact on overall company growth,” Susquehanna Financial Group analyst Christopher Rolland told Reuters.
Tech investors were also reassured by Intel that it does not expect any material impact from the recent disclosure of security flaws Spectre and Meltdown in billions of its chips.
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