ETFs
Should you play NVIDIA earnings with bullish ETFs? – May 20, 2024
- (1:30) – Why are Nvidia GPUs so important for AI?
- (11:00) – What price target should investors expect from Nvidia in the future?
- (14:50) – Nvidia’s big competition: breaking down AMD as it helps meet GPU demand
- (21:35) – GraniteShares 2x Long NVDA Daily ETF: NVDL
- (37:35) – Key takeaways from the evolving AI industry
- Podcast@Zacks.com
In this episode of ETF Spotlight, I speak with Zacks Senior Equity Strategist Kevin Cook about NVIDIA (NVDA – Free report), arguably the most valuable company in the world today, and some ETFs that investors could use to capitalize on its profits.
The AI chip giant is set to report earnings on March 22, and analysts are rushing to raise their price targets ahead of the highly anticipated event.
At its GPU Technology Conference (GTC) in March, NVIDIA launched its next generation of AI chips. CEO Jensen Huang said these significantly outperform the H100 systems that power generative AI services like ChatGPT. Read: Bull of the day: NVIDIA (NVDA – Free report)
Thanks to increasing demand for its AI chips, NVIDIA shares are up more than 90% this year, following a rise of nearly 240% in 2023. Its valuation does not appear overblown, however, as profits grow faster than its share price.
The stock currently trades at about 38 times expected earnings, below its five-year median and those of many other chip stocks, including AMD (AMD – Free report) .
NVIDIA currently controls more than 80% of the market for cutting-edge chips used to train and run large language models that underpin generative AI.
The largest technology companies, including Microsoft (MSFT – Free report), Amazon (AMZN – Free report) , the alphabet (GOOGLE – Free report) and metaplatforms (META – Free report), currently represent more than 40% of NVIDIA’s revenues.
While NVIDIA’s GPUs are unmatched for training AI models, chips from other companies like Intel (INTC – Free report) and AMD can be used for inference once the models are trained.
NVIDIA also appears to have a dominant position in the inference market, but it could face competition in the coming years. Additionally, big tech companies are designing their own chips, which could reduce their reliance on NVIDIA.
NVIDIA’s meteoric rise has attracted some investors to single-stock ETFs that aim to double their daily returns. The GraniteShares 2x Long NVDA Daily ETF (NVDL – Free report) has about $2 billion in assets, and the T-Rex 2X Long NVIDIA Daily Target ETF (NVDX – Free report) raised around $360 million.
I believe these instruments can be used effectively as short-term tactical trading tools before or after earnings. However, investors should remember that these products are not intended for buy-and-hold investing and should only be used by those who closely monitor their portfolios.
Tune in to the podcast to learn more.
Be on the lookout for the next edition of ETF Spotlight and don’t forget to subscribe! If you have any comments or questions, please email podcast@zacks.com.
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