ETFs
NVIDIA overtakes Apple: ETFs will exploit the incredible growth story – June 6, 2024
NVIDIA (NVDA Quick QuoteNVDA – Free report) has experienced an explosive surge with no signs of slowing down, fueled by the artificial intelligence (AI) frenzy and blockbuster profits. The chipmaker has overtaken Apple (AAPL Quick QuoteAAPL – Free report), surpassing $3,000 billion in market capitalization and becoming the second most valuable company in the United States. NVIDIA reached the $1 trillion mark in May 2023 and reached $2 trillion in February 2024, surpassing Amazon and Alphabet.
Investors can benefit from its incredible growth with the help of ETFs that hold the largest allocation to this AI darling. These include Strive US Semiconductor ETF (Quick quote SHOCSHOCK – Free report) , AXS Esoterica NextG Economy ETF (Quick quote WUGIWUGI – Free report) , VanEck Vectors Semiconductor ETF (Quick quote SMHSMH – Free report) , Grizzle Growth ETF (DARP quick quoteDARP – Free report) And TrueShares Technology, AI and Deep Learning ETF (Quick quote LRNZLRNZ – Free report) . All these funds have NVIDIA as the main holding with a high concentration.
The latest catalyst for growth is stock splits and the fervor surrounding next-generation AI chips. This solid trend is expected to continue.
NVIDIA sparked a retail trading frenzy following news of the 10-for-1 stock split. At the end of the week, NVDA will undergo a 10-for-1 stock split, making its shares more affordable for a wider range of investors, including those making small transactions, and will increase liquidity. In a stock split, the company increases the number of shares, thereby reducing the stock price. However, the total dollar value of all outstanding shares remains the same and does not affect the company’s valuation (read: ETFs will exploit NVIDIA’s 10-for-1 stock split retail frenzy).
The stock split will also likely pave the way for NVIDIA’s inclusion in the Dow Jones Industrial Average, similar to Amazon (AMZN), which joined the index earlier this year after undergoing a stock split. shares by 20 for 1 in June 2022.
NVIDIA has been the biggest beneficiary of the AI boom. Last weekend, the AI chipmaker unveiled a high-power version of its Blackwell chip – called Blackwell Ultra – scheduled for release in 2025, followed by a new AI chip platform, Rubin, in 2026 The company will launch an Ultra version of Rubin. in 2027. Its first Blackwell processors are expected to ship later this year, replacing the popular Hopper generative AI chips.
Companies like Microsoft, Meta Platforms and Alphabet are rapidly expanding their AI computing capabilities, driving NVIDIA’s growth. NVIDIA has an estimated 80% market share of data center AI chips, which attract billions of dollars in spending from large cloud providers.
Additionally, Elon Musk recently announced that AI startup xAI’s supercomputer will run on NVIDIA technology. This week, Foxconn announced plans to build an advanced computing center in Taiwan using NVIDIA’s Blackwell chips. These measures should further strengthen the company’s growth prospects.
The bulls are here
Wall Street analysts are more bullish on NVIDIA and continue to raise their price targets. This week, Bank of America called NVIDIA a “top pick,” reiterating its Buy rating on the stock and increasing its price target from $1,320 to $1,500. As the chipmaker accelerates its product upgrade cycle, the analyst believes the move “will continue to strengthen NVIDIA’s leadership position in AI.”
Driven by explosive growth prospects, Wall Street analysts became more bullish on NVIDIA and raised the stock’s target price following the earnings. At least 28 of 58 brokerages raised their price targets on the stock, pushing the median price to $1,200, according to recent LSEG data.
NVIDIA currently has a average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated from actual recommendations (Buy, Hold, Sell etc.) made by 41 stockbroking firms. The current ABR compares to an ABR of 1.20 a month ago, based on 40 recommendations.
Of the 41 recommendations that arise from the current ABR, 36 are strong buys and two are buys. Strong Buy and Buy represent 87.8% and 4.88% of all recommendations, respectively. A month ago, Strong Buy accounted for 87.5%, while Buy accounted for 5%.
Attractive valuations
NVIDIA stock is up more than 140% this year and 200% over the past year. It is by far the most successful among the so-called “Magnificent Seven”. Its valuation does not seem excessive, however, given that its profits are growing faster than the share price. NVIDIA is currently trading at a P/E ratio of 42.85 compared to 47.81 for Advanced Micro Devices (AMD Quick QuoteAMD – Free report) (read: AMD-Nvidia ETFs in focus amid new chip introductions).
ETF to exploit
Strive US Semiconductor ETF (SHOC Quick QuoteSHOCK – Free report)
The Strive US Semiconductor ETF seeks broad market exposure to the US semiconductor sector. It tracks the Bloomberg US Listed Semiconductors Select Total Return Index and holds 32 stocks in its basket, with NVIDIA accounting for 31.9% of assets. The Strive US Semiconductor ETF has $71.4 million in assets under management and charges 40 basis points in annual fees. It trades an average volume of 13,000 shares per day and has a Zacks ETF Rank #2 (Buy).
AXS Esoterica NextG Economy ETF (WUGI Quick QuoteWUGI – Free report)
AXS Esoterica NextG Economy ETF is an actively managed ETF that invests in stocks of companies that benefit from the evolving digital economy. It holds 31 stocks in the basket, with NVIDIA accounting for a 26.1% share. The AXS Esoterica NextG Economy ETF has accumulated $29.5 million in its asset base and charges 75 basis points in fees per year. It trades an average volume of 32,000 shares per day.
VanEck Vectors Semiconductor ETF (SMH Quick QuoteSMH – Free report)
The VanEck Vectors Semiconductor ETF provides exposure to companies involved in semiconductor production and equipment. It tracks the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket, with NVIDIA accounting for 24.5% of total assets. VanEck Vectors Semiconductor ETF has managed assets worth $20.5 billion and charges 35 basis points in annual fees and expenses. SMH has a Zacks ETF Rank #1 (Strong Buy) with a High Risk outlook.
Grizzle Growth ETF (DARP Quick QuoteDARP – Free report)
Grizzle Growth ETF is an actively managed ETF that seeks long-term capital appreciation through companies focused on growth, innovation and disruption. It seeks to identify future leaders in key growth themes including digitalization and cloud computing, future media and entertainment, health and well-being, and sustainability and energy transition. Grizzle Growth ETF holds 41 stocks in its basket, with NVIDIA accounting for 24.2% of assets. It has accumulated $14.1 million in its asset base and charges 75 basis points in annual fees (read: AI boom bolsters NVIDIA’s Q1 growth: ETFs to exploit).
TrueShares Technology, AI & Deep Learning ETF (LRNZ Quick QuoteLRNZ – Free report)
TrueShares Technology, AI and Deep Learning ETF is an actively managed fund targeting companies heavily involved in the application of high levels of artificial intelligence. He holds 23 stocks in his basket, with NVIDIA accounting for a 17.8% share. LRNZ has amassed $41.3 million in assets and trades an average daily volume of 8,000 shares. It charges 69 basis points in fees per year.