Semiconductor ETFs Strengthen Ahead of an Optimistic Nvidia Earnings Report

Nvidia (NasdaqGS: NVDA) surged on Tuesday, lifting semiconductor sector-related exchange traded funds, as traders took an optimistic bet on the chipmaker ahead of its earnings release.

On Tuesday, the iShares PHLX Semiconductor ETF (NasdaqGS: SOXX) gained 4.8% and the VanEck Vectors Semiconductor ETF (SMH) rose 4.6%.

Meanwhile, Nvidia shares increased 8.2% on Tuesday. NVDA makes up 9.0% of SMH’s underlying portfolio and 6.7% of SOXX.

Nvidia shares rallied on Tuesday morning after investment bank Piper Sandler predicted on the day before fourth-quarter earnings arrive that Nvidia could show “significant beat and raise,” according to

“Overall, demand [for Nvidia’s chips] continues to be strong for gaming given the adoption of RTX GPUs with ray tracing,” Piper Sandler said. “In our eyes, this growth appears to be in the early-to-mid stages of the growth curve, and with no signs of supply alleviating in the near term, it provides a nice backdrop for the gaming segment. On the data center side, we have heard from several companies that data center trends are very strong, which should benefit Nvidia.”

Piper Sandler is projecting that Nvidia will exceed expectations for quarterly revenue and earnings growth on its fourth-quarter results. It is also outlining a positive long-term growth outlook because of the cyclical semiconductors industry, which is only in the early stages of its cycle of rising chip demand.

The positive sentiment is mirrored by other analysts.

“We are looking for a significant beat and raise when the company reports earnings on Wednesday after market close, as both gaming and data center continue to perform well,” analyst Harsh V. Kumar said in a note, according to Barron’s.

Kumar also pointed to an upgraded cycle in GPUs to drive growth in gaming, along with improving revenue from the company’s data center business.

“We believe the data center business will be responsible for much of the revenue performance, translating to both an EPS and revenue beat,” Kumar added.

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