Top semiconductor ETFs have rallied in the past few years as the tailwinds in the AI industry continued. The VanEck Semiconductor ETF (SMH) jumped to a high of $348 this month, up by 100% from its lowest point in April.
Similarly, the iShares Semiconductor ETF (SMH) rose to $292, also up by 95% from its April lows. This surge could continue after Taiwan Semiconductor (TSM) published strong results that demonstrated more demand for chips.
Taiwan Semiconductor and SML Earnings
The main catalyst for the SOXX and SMH ETFs is the recent Taiwan Semiconductor earnings, which were better than expected. In a statement, the company said that its quarterly profits jumped by 39% in the third quarter.
The net income soared to $14.8 billion or NT$452.3 billion, higher than the median estimate of NT$405 billion. Most importantly, the company hinted that it would have a 30% increase in revenue. In a note, Bloomberg analysts said:
“This momentum is expected to continue into 4Q, when strong orders for Apple’s A19 and Nvidia’s Blackwell chips should largely offset typical seasonality and tariff-related headwinds.”
Therefore, its strong earnings mean that companies continued placing orders from TSM during the quarter. This is notable because TSM serves the biggest companies in the chip industry, like Nvidia, AMD, Intel, and Qualcomm. It also manufactures custom chips by companies like Apple and Microsoft.
TSM’s results came a day after ASML, another proxy for the chips industry, delivered strong results during the quarter. ASML earnings showed that its bookings jumped to 5.4 billion euros, much higher than the expected 4.9 billion euros. Its sales, however, came in at 7.5 billion euros, slightly lower than the 7.7 billion euros that analysts were expecting.
The company has bounced back after crashing three months ago when the CEO warned of a potential slowdown in the AI industry will slow down because of Donald Trump’s tariffs.
Impact on SOXX and SOXL ETFs
SMH and SOXX ETFs will benefit from the latest results by TSM and ASML because these companies are the top players in the industry. ASML is the only provider of lithography solutions, while TSM is the biggest foundry.
As such, their strong numbers mean that their customers placed more orders in the third quarter. This is highly possible because of the large deals that have been announced recently.
For example, Nvidia agreed to invest up to $100 billion in OpenAI. In this deal, OpenAI will deploy millions of Nvidia chips in its data centers.
Additionally, OpenAI has indeed a deal with Oracle and AMD, implying more demand for these solutions. Other chip companies in the SOXX and SMH ETFs that will benefit from these investments are Broadcom, Applied Materials, Lam Research, and Micron.
Therefore, there are signs that chip companies will publish strong financial results. In September, Micron published strong earnings that demonstrated demand for NAND and DRAM products.
Analysts expect that Nvidia’s earnings will show that revenues jumped by 55% in the third quarter to $54 billion. They see the guidance for the full year revenues being $206 billion, up by 58% from last year.
Other chip companies are also expected to publish strong numbers, with AMD’s revenue coming in at $8.74 billion, up by 28% from the same period last year.
These numbers will help to support the SOXX and SMH ETF stocks in the coming weeks. However, the main risk for the industry is that the AI bubble may burst this year.
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