Semiconductor sector-related exchange-traded funds rallied higher on Thursday following Nvidia's (NASDAQ: NVDA) stellar third-quarter revenue beat despite ongoing global chip shortage pressures.
The VanEck Vectors Semiconductor ETF (NYSE: SMH) outperformed its peers on Thursday, rising by 2.5%, while the Invesco PHLX Semiconductor ETF (NASDAQ: SOXQ) and the iShares PHLX Semiconductor ETF (NASDAQ: SOXX) advanced by 1.8% and 1.7%, respectively. Nvidia shares were 8.3% higher on the report, with the chipmaker making up 10.3% of SMH's portfolio, 9.4% of SOXQ, and 9.3% of SOXX.
Nvidia reported that Q3 sales rose 50% to $7.1 billion, with a net income of $2.46 billion. That total beat Wall Street consensus expectations for $6.8 billion in revenue and $2.27 billion in net income. The quarter's beat was driven by record sales for the company's video game and data-center segments, increasing by 42% and 55% year-over-year, respectively.
Nvidia said it has benefited despite the global semiconductor shortage because buyers are still demanding devices to run video games--what the company is known for--or data centers in the post-pandemic climate.
Moreover, the increased demand has not threatened the chipmaker's supply chain; Chief Executive Jensen Huang said during a call post-earnings that the company's "supply situation" is pretty solid, especially "starting in the second half of next year and going forward." Huang noted that the chipmaker has also taken ensure long-term supply agreements, highlighting on the company's $1.64 billion in advanced chip orders made in Q3.
Huang told Yahoo Finance Live recently that he thinks demand for semiconductors will continue to outpace supply through 2022. "We have the support of our suppliers. We're fortunate that we're multi-sourced and that our supply chain is diverse and our company is quite large so we have the support of a large ecosystem around us," he said.
Looking ahead at the company's strategy, Huang anticipated that there will be plenty of growth opportunities in the budding metaverse, or the next-generation of the internet as we know it. In its earnings report, the chipmaker highlighted on its new Omniverse Enterprise platfrom, which is built to provide virtual collaboration and real-time simulation. Huang suggested on Yahoo Finance Live that Nvidia could be one of the major suppliers for technology companies involved in designing the metaverse.
"It is a 3D extension of the internet that is going to be much, much bigger than the 3D physical world that we enjoy today," Huang told Yahoo Finance, describing the metaverse. He added than "the economy of the virtual world will be much, much bigger than the economy of the physical world."