Semiconductor industry stalwart Nvidia Corp. greeted investors Monday morning with a bombshell announcement that its fourth-quarter sales will be roughly $500 million short of expectations due to slow adoption of its new high-end gaming cards and weakness in its data-center business. Nvidia’s shares plunged as much as 18 percent in morning trading, and were down about 15 percent at 2:00 p.m.
A little more than 7 percent of all Nvidia shares outstanding on a free-float basis are held in ETFs, according to XTF.com. With a market cap of roughly $84 billion, Nvidia is prominently featured in exchange-traded funds focused on the chip industry, as well as in other tech-centric funds.
That includes the iShares PHLX Semiconductor ETF (SOXX), the largest semiconductor-focused ETF with assets of $1.1 billion. Nvidia is the third-largest holding in market cap-weighted SOXX, at 7.7 percent, and that position weighed on the fund as it was down 2.3 percent in afternoon trading.
The second-biggest fund in the semis group, the $971 million VanEck Vectors Semiconductor ETF (SMH), which is also market cap-weighted and where Nvidia is the fourth-largest holding at 5.7 percent, was down 2 percent on the day.
By comparison, the equal-weighted SPDR S&P Semiconductor ETF (XSD), a $249 million product which includes Nvidia in its holdings, was down a less-painful 1.4 percent.
Other non-cap-weighted semiconductor ETFs also fared better in Monday's trading. That includes the First Trust Nasdaq Semiconductor ETF (FTXL) that’s based on the Nasdaq US Smart Semiconductor Index, a modified factor-weighted index composed of 30 semiconductor companies from the Nasdaq US Benchmark Index. Constituents are ranked based on three factors: volatility (trailing 12-month price fluctuation); value (cash flow-to-price) and growth (three-, six-, nine- and 12-month average price appreciation).
Nvidia is the third-smallest holding in this $21 million fund, with a weighting of 2.35 percent. FTXL was down 1.2 percent in afternoon trading.
Elsewhere among chip ETFs, there’s the $168 million Invesco Dynamic Semiconductors ETF (PSI), which employs a factor-based approach to portfolio construction focused on price momentum, earnings momentum, quality, management action and value. Based on those criteria, Nvidia evidently didn’t make the grade because it’s not one of the fund’s 30 holdings.
Still, PSI was down about 0.90 percent on Monday, a reflection of semis falling as a group in reaction to Nvidia’s bad news. The PHLX Semiconductor Sector Index was down 2.3 percent in the mid-afternoon.
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