Nvidia's Q1 Earnings May Mark A Turning Point For Chip ETFs

As Nvidia NVDA prepares to report earnings on Wednesday, investors are not simply waiting for numbers; they’re listening for a seismic shift in chip geopolitics. With China sales squeezed by a regulatory vise and the Middle East stepping up as an unlikely new purchaser of AI brawn, the question hangs: Will Nvidia’s transformation remake the semiconductor map and the ETFs that follow it?

Welcome to the era of ETF-lation, where macro headwinds and AI ambitions cross paths to challenge the durability of chip-laden ETFs.

From Sanctions To Sand Dunes: Nvidia’s AI Detour

Following a $5.5 billion blow from U.S. export curbs on its H20 chips to China, Nvidia is making lemonade from silicon. Recent transactions in the Middle East, such as the sale of 18,000 Blackwell chips to Saudi Arabia’s Humain and a multi-country collaboration with the UAE to establish an AI campus, are turning out to be the company’s new money-making frontier.

These transactions won’t entirely recoup the estimated $15 billion in FY26 lost sales associated with the ban, but they provide a compelling second-quarter narrative, particularly as President Trump’s latest Middle Eastern dealstorm puts U.S. tech back on regional center stage.

Also Read: Alarm Bells For Nvidia As $9.8 Billion Blow Threatens A Crash: ETFs With Most Risk Or Opportunity

ETF Exposure: Who Has the Most Skin In The Chip Game?

For investors in ETFs, Nvidia’s shift has ripple effects. Semiconductors are notoriously cyclical, but AI is a different game. Here’s how the most chip-dense funds:

VanEck Semiconductor ETF SMH: Nvidia carries the heaviest weight (~21%), so this fund is the most sensitive to tomorrow’s earnings pyrotechnics whether good or bad.

iShares Semiconductor ETF SOXX: As a leading holding (around 8-10%), Nvidia puts SOXX on more diversified exposure of old-line chipmakers such as Intel INTC and Broadcom AVGO.

Global X Artificial Intelligence & Technology ETF AIQ: Less silicon than AI, but still bouncing off the coattails of Nvidia. Middle East alliances would add fuel to AIQ’s thematic growth story.

Also Read: Nvidia’s Q1 Earnings Loom, While AMD’s Edge AI Bet Could Change The Narrative

How A Strong Q2 Outlook Could Rewire Chip ETFs

The newly signed Saudi Arabian deals, especially the sale of 18,000 Blackwell chips to Humain, may provide a strong upside shock to Nvidia’s second-quarter outlook. If Nvidia’s management hints that these Middle Eastern deals are driving good revenue growth, it will do more than just support the stock price.

SMH and SOXX might experience a new wave of investor capital as excitement over Nvidia’s refreshed growth pipeline revives semiconductor exposure confidence. A robust Q2 outlook might lead portfolio managers to add weighting to Nvidia or position more aggressively in chipmakers with exposure to increasing AI infrastructure in the Gulf.

AI-themed ETFs such as AIQ and ROBO Global Robotics and Automation ETF ROBO may catch the narrative wave and receive flows from investors looking to support the ‘new AI frontier’ beyond China. This would broaden their theme appeal among global AI growth hunters.

A surprise positive would also mute fears over the $5.5 billion write-off and margin squeeze, cooling the downside pressures that have weighed on chip ETFs in the last few weeks.

Risk, Meet Rotation

Bank of America cautioned a gross margin decline, from 71% to 58%, as a result of the $5.5 billion inventory write-down. Pro forma EPS could miss consensus by up to 16%, declining to $0.74. Nonetheless, the company has a “Buy” rating with a $160 price target, depending on long-term AI tailwinds.

This presents a strategic dilemma to ETF investors: double down on semiconductors or swing into more diversified technology and AI funds?

Consider these two strategic plays:

Hold the line on concentrated exposure (SMH/SOXX) if you’re confident in Middle East-led growth.

Swing into AI-themed ETFs like ROBO, THNQ, or even WTAI for a more diversified innovation play with less Nvidia sensitivity.

Bottom Line: A Fork In The AI Road

As tensions between the U.S. and China heighten and AI infrastructure explodes elsewhere, ETF managers might have to reevaluate country-specific threats and demand pipelines.

If Nvidia reports high guidance tomorrow, chip-heavy funds can take off. If it doesn’t, investors might begin to look around for who’s next in the AI battle and which ETFs are best poised to profit.

Either way, the silicon tale is no longer an American or a Chinese one; it’s global, geopolitical, and coming directly into your ETF screen.

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