Semiconductor ETFs Retreat After Nvidia Warns of Weak Gaming Sales | ETF Trends

Nvidia Cop. (NasdaqGS: NVDA) shares plunged, pulling down semiconductor sector-related exchange traded funds after the tech company warned of falling demand for personal computers.

On Monday, the iShares PHLX Semiconductor ETF (NasdaqGS: SOXX) decreased 2.5%, the VanEck Vectors Semiconductor ETF (SMH) declined 2.5%, and the Invesco PHLX Semiconductor ETF (SOXQ) fell 2.3%.

Meanwhile, Nvidia shares dropped 8.3%. NVDA makes up 8.8% of SMH’s underlying portfolio, 8.1% of SOXX, and 7.9% of SOXQ.

Nvidia projected revenue of 6.7% billion for the latest quarter, or 17% short of the $8.1 previously forecasted in May, following a 33% plunge in gaming-related revenue. While sales are still higher year-over-year, the pace of gains was at a three-year low.

“This was an ugly negative preliminary announcement,” BMO Capital Markets analyst Ambrish Srivastava said in a note, according to Investor’s Business Daily. “While as bad as the shortfall is, this may serve as a ‘clearing’ event for shares given the miss on the gaming side was widely anticipated by investors.”

The tech company warned of the reduction in channel partner sales likely due to macroeconomic headwinds and added that it updated its pricing programs with channel partners to reflect the challenging market conditions expected to persist through the third quarter.

“Our gaming product sell-through projections declined significantly as the quarter progressed,” Jensen Huang, founder and CEO of Nvidia, said in a note. “As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory.”

“The significant charges incurred in the quarter reflect previous long-term purchase commitments we made during a time of severe component shortages and our current expectation of ongoing macroeconomic uncertainty,” Colette Kress, EVP and CFO of Nvidia, said in the same note.

Nvidia is set to report its fiscal second-quarter results on August 24.

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