ETFs
Is there more room to run?
Chip giant Nvidia NVDA has been a popular stock for over a year. The company beat earnings and stock price expectations. NVIDIA recorded a remarkable increase of more than 5% on June 5, pushing its market capitalization beyond $3 trillion for the first time.
Simultaneously, Apple AAPL reclaimed a market capitalization above $3 trillion, a milestone last achieved in January. NVIDIA’s market capitalization, however, surpassed that of Apple and became the second most valuable company in the US stock market.
Inside NVIDIA’s Strength
Recently, the company announced new chip projects. Despite new products from competitors, NVIDIA’s latest earnings report shows strong demand for its H100 chips, even with a more advanced chip, Blackwell, on the horizon. NVIDIA’s data center revenue in the most recent quarter increased 427% year over year, accounting for 86% of the company’s total revenue for the quarter.
The AI chipmaker also hits a series of new highs in the upcoming 10-for-1 stock split, which will make its shares more affordable to a wider range of investors, including those making small trades, and will rise liquidity.
Bank of America analysts raised its price target to $1,500, saying NVIDIA’s premium is justified by its growth prospects. Adam Gold, founder and chief investment officer at Katam Hill LLC, describes NVIDIA’s lead in the market as a marathon runner with a substantial lead, as quoted on Bloomberg. Gold, who has owned NVIDIA shares since 2016, continues to strengthen his position, confident in the company’s dominance.
Investors looking to seize the opportunity might consider ETFs holding the largest allocation to this AI giant. These are Strive US Semiconductor ETF SHOCK, AXS Esoterica NextG Economy ETF WUGI, VanEck Vectors Semiconductor ETF SMH, Grizzle Growth ETF DARP and TrueShares Technology, AI and Deep Learning ETF LRNZ.
Mammoth leader in AI
NVIDIA’s rapid growth in AI technology has transformed it from a niche graphics processing unit maker to one of the world’s most valuable companies, now worth nearly $3 trillion. Competitors like Advanced Micro Devices Inc. and Intel Corp. are trying to catch up, but NVIDIA’s dominance in AI remains intact.
Estimates of sales and profit growth
The Zacks Consensus Estimate for NVIDIA’s earnings growth for the current quarter is 132.59%, while the consensus estimate for sales growth is 109.12%. The growth rate is, however, expected to slow down in 2026, with the consensus estimate being 21.13% for profit growth and 22.25% for sales growth. NVIDIA’s gross margins are expected to reach 76% this fiscal year, up from 59% two years ago.
The story continues
Target price
Based on short-term price targets offered by 40 analysts, NVIDIA’s average price target stands at $1,152.04. Forecasts range from a low of $608.40 to a high of $1,400.00. The average price target represents a downside of 1.06% from the last closing price of $1,164.37 on June 4. However, with more activity coming from NVIDIA’s product launches and momentum continuing to build, analysts may revise their price targets upward from here.
Although NVIDIA shares are relatively expensive, at 39 times expected earnings over the next 12 months, they are much cheaper than the 60 multiple it was trading at before its May 2023 earnings report, analysts say. quoted on Bloomberg. Analyst earnings estimates are rising even faster than the stock.
A wall of worry?
Michael Kirkbride of Evercore Wealth Management notes that NVIDIA’s only limitation lies in supply challenges, with capital spending forecasts from major tech giants pointing to increased investment in AI infrastructure.
As for competition, Intel said its Gaudi 2 and Gaudi 3 AI accelerators will offer substantial price savings to customers. And with companies spending billions on AI chips, any price savings will likely be a huge success.
NVIDIA’s own customers, like Amazon, Google and Microsoft, will also try to reduce their reliance on its chips, save on capital expenditures and ensure a seamless transition of chip shipments. However, it is unlikely that all of these threats will manifest themselves in the short term.
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Apple Inc. (AAPL): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
TrueShares Technology, AI & Deep Learning ETF (LRNZ): ETF Research Reports
AXS Esoterica NextG Economy ETF (WUGI): ETF Research Reports
Strive US Semiconductor ETF (SHOC): ETF Research Reports
Grizzle Growth ETF (DARP): ETF Research Reports