Nvidia Rally Meets Moment Of Truth: What It Means For Tech ETFs

Benzinga
2025.08.25 21:39
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Nvidia Corp. is poised to impact major tech ETFs ahead of its earnings announcement, trading near its all-time high. It represents significant portions of several ETFs, including 22% of VanEck Semiconductor ETF. Three potential scenarios for earnings include a sharp rise in SMH if Nvidia beats expectations, a conservative response to inline results, or severe impacts on SMH if guidance is weak. Investor focus will also be on suppliers like Broadcom and AMD, with attention to hyperscaler spending and product developments.

Nvidia Corp. NVDA, trading just two percentage points below its all-time high, has emerged as a catalyst for large ETFs ahead of its earnings announcement on Wednesday. With the AI sweetheart having contributed a staggering $2 trillion in market capitalization gains since April, the stock is a behemoth mover of tech- and semiconductor-oriented funds.

Concentration is everything. Nvidia currently represents about 22% of VanEck Semiconductor ETF SMH, and thus is perhaps the single most powerful name within the fund. The fund is up 24% year-to-date.

The Tech Select Sector SPDR Fund XLK controls approximately 16%, and the Vanguard Information Technology ETF VGT is at around 18%. Both funds are up between 11% and 13% year-to-date.

Even broader tech bellwether Invesco QQQ Trust QQQ is paying close attention to Nvidia with about 10%. A change in Nvidia, no matter how modest, has the potential to impact these ETF portfolios.

Three scenarios stand out in the lead-up to earnings:

If Nvidia beats and guides higher, delivering a clearer future vision, SMH would jump sharply, XLK and VGT would trail, with QQQ enjoying a good bump as well.

In-line results may lead to a more conservative stance. With the bar set so high, even an inline quarter might be disappointing. A lukewarm response would impact more concentrated funds, such as SMH, more severely, but QQQ might take it better due to its broader diversification.

Soft guidance or weak performance. If Nvidia falters or is not clear on its most important growth drivers, such as hyperscaler CapEx, China exposure, or product lineup, anticipate high pressure. SMH would be the hardest hit, followed by sector funds, and then QQQ.

Aside from Nvidia itself, second-order consequences are significant. Investor attention will be focused on suppliers and component companies such as Broadcom Inc. AVGO, Taiwan Semiconductor Manufacturing Co. Ltd TSM and Advanced Micro Devices Inc. AMD, which are large holdings within semiconductor ETFs. Commentary on hyperscaler spend patterns and supply dynamics has the potential to resonate throughout the whole group.

Seasonality comes into play. September is known for turbulent seas: in the past, Nvidia has usually lagged during that month, and the overall market tends to be cautious. Considering this, even a small earnings beat may be unable to generate momentum if guidance is absent for new drivers.

What ETF investors need to monitor in Wednesday’s earnings:

  • Clarity regarding hyperscaler spending through 2026.
  • Any news on the product roadmap, particularly the Rubin platform or Blackwell chip ramp?
  • Comment on the export control effect and revenue blend, in particular China.
  • ETFs Hit 52-Week Highs As Investors Pour Billions Into Emerging Markets

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