The semiconductor sector, which was riding high on AI optimism, faltered last month on growing concerns about the long-term demand outlook for semiconductors and weak demand from China. The series of weak earnings from AI players like Advanced Micro Devices AMD and Super Micro Computer SMCI was the latest blow, resulting in a sell-off in the broader sector on May 1. Notably, the Philadelphia Semiconductor Index dropped 3.5% on the day (read: Can Q1 Earnings Results Recharge Semiconductor ETFs?).

Inside the Slump

AMD offered downbeat guidance for 2024 sales of its newly released AI chip, which pushed the stock down 9%. Though the company raised its revenue target for MI300 to at least $4 billion from $3.5 billion, Wall Street was looking for a bigger boost from the accelerator business. At least 12 analysts cut their price targets on AMD stock after the company's first-quarter report. However, some analysts are still positive about the company’s growth prospects. They believe that easing supply chain constraints would allow the company to increase its share in the AI chip market and potentially reap billions of dollars in revenues.

Super Micro Computer plunged 14% following its revenue miss amid concerns over the profitability of a new line of servers. However, some analysts raised the target price on the stock following its results, stating that AI is still in the early stages and will continue to grow.

The performance of the duo caused some disappointment, resulting in a decline in other semiconductor stocks. Nvidia NVDA, which is at the forefront of AI innovations, fell 5.7%. Notably, the three stocks erased a collective $143 billion in market value. Chipmakers like Micron Technology MU and Marvell Technology MRVL slid 2.9% and 3.6%, respectively (read: What's Ahead for Nvidia ETFs?).

Skyworks SWKS stock tumbled 15.3% after the company provided weak revenue guidance on demand concerns as clients struggled to offload excess inventory.

ETF Impact

The terrible trading in the stock world sent the semiconductor ETFs space into red on the day. VanEck Vectors Semiconductor ETF SMH, iShares Semiconductor ETF SOXX, Invesco PHLX Semiconductor ETF SOXQ, Strive U.S. Semiconductor ETF SHOC and First Trust NASDAQ Semiconductor ETF FTXL have lost around 3% each on the day.

SMH

VanEck Vectors Semiconductor ETF follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket. It favors the largest companies in the industry. VanEck Vectors Semiconductor ETF has managed assets worth $18.3 billion and charges 35 bps in annual fees and expenses.

SOXX

iShares Semiconductor ETF tracks the NYSE Semiconductor Index and holds 30 securities in its basket. It has amassed $12.6 billion in its asset base and charges a fee of 35 bps a year from investors.

SOXQ

Invesco PHLX Semiconductor ETF offers exposure to the largest U.S.-listed securities of companies engaged in the semiconductor business. It tracks the PHLX Semiconductor Sector Index, holding 30 stocks in its basket. It has accumulated $364 million in its asset base and charges 19 bps in annual fees.

SHOC

Strive U.S. Semiconductor ETF seeks broad market exposure to the U.S. semiconductor sector. It follows the Solactive United States Semiconductors 30 Capped Index and holds 32 stocks in its basket. Strive U.S. Semiconductor ETF has AUM of $59.1 million and charges 40 bps in annual fees.

FTXL

First Trust Nasdaq Semiconductor ETF offers exposure to the most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. FTXL holds 31 stocks in its basket and charges 60 bps in annual fees. First Trust Nasdaq Semiconductor ETF has $1.4 billion in AUM.