In the wake of disappointing quarterly reports from major players in the semiconductor industry, semiconductor exchange-traded funds (ETFs) have taken a significant hit, with Nvidia, AMD, and Broadcom stocks leading the decline. The sell-off is indicative of a broader pullback in the sector, primarily driven by concerns surrounding the performance of artificial intelligence (AI)-related stocks.

Broadcom Inc., a leading chipmaker, released its third-quarter earnings on Thursday, reporting a 42% growth in revenue to $13.07 billion, surpassing the analyst estimate. The company also provided a positive outlook for the fourth quarter, projecting revenue of $14 billion, above the analyst consensus. Additionally, Broadcom's adjusted gross margin demonstrated strong growth compared to the previous year.

Similarly, Nvidia's second-quarter revenue reached $30.04 billion, outperforming analysts' expectations. The company expects to continue this positive trend in the third quarter with estimated revenue ranging from $31.85 billion to $33.15 billion. Although Nvidia experienced a decline in its adjusted gross margin over the previous quarter, it still exhibited considerable growth compared to the previous year.

Despite the optimistic outlooks provided by Broadcom and Nvidia, semiconductor ETFs such as VanEck Semiconductor ETF and iShares Semiconductor ETF have experienced a significant 12% decline over the past five days. Within this time frame, Nvidia suffered a 15% drop, AMD's stock fell by over 10%, and Taiwan Semiconductor's shares declined by 8%.

The downward trajectory of these stocks has persisted, despite reassurances from major contract chipmakers such as Taiwan Semiconductor and Samsung Electronics regarding the sustained demand for AI-related products. Analysts have remained cautiously optimistic, highlighting robust AI growth, VMware momentum, and a recovery in traditional semiconductor sectors as factors that could potentially drive future growth.

Notably, ProShares Ultra Semiconductors, an ETF that reflects the performance of the Dow Jones U.S. Semiconductors Index, experienced a significant loss of 26% over the past five days, indicating high volatility within the sector. On the other hand, ProShares UltraShort Semiconductors, which inversely tracks the performance of the same index, gained 28% in the same time frame, demonstrating the heightened risk investors are facing.

While broader ETFs tied to indexes such as the S&P 500 and NASDAQ experienced losses, the impact was relatively less pronounced due to the resilience of big tech stocks like Apple Inc., Amazon.com Inc., and Microsoft Corp. The SPDR S&P 500 ETF Trust, which tracks the S&P 500 stock market index, lost 3.5% over the past five days, while the Invesco QQQ Trust saw a 5% decline.

Overall, the semiconductor sector has been grappling with significant losses, driven by concerns over the performance of AI-related stocks. As the industry navigates through this challenging period, analysts continue to closely monitor the progress of key players, the trajectory of revenues, and the potential impact on the broader market.