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NVIDIA Corp (NASDAQ:NVDA) is slated to release its second-quarter report with a heavy policy hangover: a forecasted $8 billion impact related to U.S. chip-export restrictions to China.
NVDA is gathering positive momentum. See if it is worth your attention here.
That number, initially mentioned on the company’s first-quarter call, will be heavily watched when the AI giant reports Wednesday after the bell. And the effect may run far deeper than Nvidia shares, tugging at the strings of the semiconductor ETFs in which Nvidia has significant influence.
Trump’s regulatory whiplash — prohibiting chip exports to China in April, repealing the prohibition in July and then imposing a 15% tariff on sales into the country in August — has caused investors to doubt the sustainability of Nvidia’s revenue streams. The warning is that China is still an important market, and any turmoil there can tarnish sentiment for chipmakers generally.
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Nvidia’s presence in ETFs is widespread. It’s the top holding in the VanEck Semiconductor ETF (NASDAQ:SMH) and iShares Semiconductor ETF (NASDAQ:SOXX), with weightings above 20% and 15%, respectively, and a major part of the Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ). A sudden shift in Nvidia can pull these baskets, along with other tech funds such as Invesco QQQ Trust (NASDAQ:QQQ) and Technology Select Sector SPDR Fund (NYSE:XLK).
The options market is already preparing for volatility, with traders factoring in a possible $260 billion swing in Nvidia’s market cap after earnings, per a Reuters report. That sort of move would be magnified across ETFs, particularly those highly concentrated in semiconductors.
Nvidia’s performance tends to lead the way for its industry. If Wednesday’s report validates a significant China disappointment, investors may rotate out of high-exposure names such as Advanced Micro Devices Inc (NASDAQ:AMD), Broadcom Inc (NASDAQ:AVGO) and Marvell Technology Inc (NASDAQ:MRVL), even if their China risk is lower. While chipmakers with larger domestic footprints, such as Intel Corp (NASDAQ:INTC), might profit if tariff rhetoric becomes more significant.
Those who have followed the AI tide higher are especially well-positioned to capitalize on the risk rebalancing Nvidia’s earnings present. While policy tension and ETF concentration do make Nvidia a risk point in the sector, the firm’s data center tailwind, which is projected this quarter at $41.2 billion, is no less potent.
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