Down Comes Nvidia And The Tech ETFs That Rode It To Stellar Gains

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Semiconductor ETFs slumped on Wednesday as a leading chipmaker - which is also the market's top stock of 2016 - toppled after a 10-day run of gains.

Nvidia ( NVDA ) was added to the IBD 50 list of elite growth stocks in late February, before it broke out of an extended base for eventual gains of more than 240%.

It jumped 7% on Tuesday, an action that IBD's markets team cautioned was toppy .

On the stock market today , Nvidia gave back all of Tuesday's gains, tumbling 7% to 109.25 in heavy volume. The losses were linked to a short seller's tweet that the graphics chipmaker would retreat to 90 in 2017.

[ibdchart symbol="SOXX" type="weekly" size="quarter" position="leftchart" ]

Exchange traded funds investing in chipmakers fell in tandem as Nvidia's woes radiated through the semiconductor industry.

Some of these chip ETFs count Nvidia as their No. 1 holding. Their big stakes in the stock have helped them jump between 35% and 50% year to date.

The flagship chip ETF, iShares PHLX Semiconductor ( SOXX ), made a fresh high of 127.91 in early Wednesday trade but quickly reversed lower.

The ETF closed down 1.9%, at the bottom of the day's range.

SOXX invests assets of $730.78 million across 30 semiconductor stocks. Nvidia has for a 9% weight in the portfolio - more than any other holding.

Year to date through Dec. 27, SOXX is up roughly 43%.

That's well ahead of the 17% gain for the broadly diversified Technology Select Sector SPDR ( XLK ), which invests in chipmakers as well as software companies, electronic parts suppliers and other tech firms.

The broad market, as tracked by SPDR S&P 500 ( SPY ), has advanced 13.4% so far in 2016.

IBD'S TAKE : Read the article, " Did Nvidia Just Signal A Correction Is Near?," that warned the chipmaker was making a possible climax run.

Among other chip ETFs, PowerShares Dynamic Semiconductors ( PSI ) fell 2.1% on Wednesday but is still up 50% on the year through Dec. 27. Nvidia is its top stock too.

VanEck Vectors Semiconductor (SMH) and SPDR S&P Semiconductor (XSD) also booked losses of close to 2%.

Investors flocked to semiconductor ETFs in 2016, especially following a blowout quarterly report from Nvidia in November.

Year to date through November, SOXX has seen $155.3 million in net inflow and SMH absorbed $413.5 million.

Multiple analyst upgrades for Nvidia - which is a leader in gaming, virtual reality, artificial intelligence, machine learning and automotive - followed its November earnings result.

Goldman Sachs added Nvidia stock to its "Conviction Buy List," describing the company as a "unique growth story" among semiconductor companies.

PowerShares QQQ (QQQ), which tracks the tech-heavy Nasdaq-100 and holds Nvidia among its top 25 stocks, gave up 0.8% on Wednesday.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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