Nvidia NVDA hit a $1 trillion market-cap valuation, becoming the world’s ninth public company and the first chipmaker to ever hit the trillion level. The stock has soared more than 165% since the start of 2023, fueled by the artificial intelligence (AI) frenzy thanks to its high-powered graphics cards and server products (read: Guide to Artificial Intelligence ETFs).
Investors could tap the strength with the help of ETFs having the largest allocation to NVIDIA. These include AXS Esoterica NextG Economy ETF WUGI, Pacer Data and Digital Revolution ETF TRFK, VanEck Vectors Semiconductor ETF SMH, The Spear Alpha ETF SPRX and Global X Robotics & Artificial Intelligence ETF BOTZ.
Inside the Surge
The chipmaker is seeing explosive demand for its cutting-edge chips used in AI applications, which are used to power ChatGPT and many similar services, and is boosting supply to meet surging demand. Nvidia's chips are used in applications ranging from robotics and the metaverse to medical imaging and video analytics.
This weekend, the company unveiled a new batch of products and services tied to artificial intelligence, including the DGX GH200, "a new class of large-memory AI supercomputer" for giant, next-gen models, during an event in Taiwan. Microsoft (MSFT), Alphabet (GOOGL) and Meta Platforms (META) are expected to be among the first to gain access to it.
More than two dozen Wall Street analysts have turned super bullish after the latest quarterly result and raised their price targets on Nvidia stock. Nvidia topped both earnings and revenue estimates buoyed by the strength of its data center business. It offered a bullish revenue outlook for the current quarter on the excitement surrounding an investment boom in AI technologies.
For the second quarter of fiscal 2024, the graphics chipmaker expects revenues of around $11 billion, plus or minus 2% on increased demand for its data-center family of products, including H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU, sparked by the AI boom. The forecast came in more than 50% ahead of street consensus (read: ETFs to Buy on Nvidia's Blowout Q1 Earnings).
Solid Nvidia Fundamentals
Despite the astounding rally, Nvidia shares look cheap based on P/E ratio. According to data from Refinitiv, Nvidia will trade at around 45 times Wall Street's average earnings estimates for the next 12 months. This is cheap when compared to a multiple of 62 on May 18, which the stock traded at, roughly a week before Nvidia's quarterly update sent the market into a frenzy.
Nvidia earnings estimates have been raised by 23 cents for the fiscal year (ending January 2024) over the past seven days. This represents year-over-year growth of 42.81%. Revenues are expected to grow 42.8% for the current fiscal. Further, Nvidia currently carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of B.
ETFs in Focus
Let’s delve into each ETF below:
AXS Esoterica NextG Economy ETF (WUGI)
AXS Esoterica NextG Economy ETF is an actively managed ETF that invests in stocks of companies that benefit from the ever-evolving digital economy. It holds 30 stocks in the basket, with Nvidia occupying the top position at 16.7%. AXS Esoterica NextG Economy ETF has key holdings in electronic compo-semiconductor, computer software and applications software.
AXS Esoterica NextG Economy ETF has accumulated $18.7 million in its asset base and charges 75 bps in fees per year. It trades in an average daily volume of 2,000 shares.
Pacer Data and Digital Revolution ETF (TRFK)
Pacer Data and Digital Revolution ETF aims to offer investors exposure to the globally listed stocks and depositary receipts of data and digital revolution companies. It follows the Pacer Data Transmission and Communication Revolution Index, holding 80 stocks in its basket. Out of these, Nvidia is the top firm, accounting for a 12.4% share. Semiconductors takes the largest share at 33.7%, while communication equipment and system software round off the next two spots.
Pacer Data and Digital Revolution ETF debuted last year in June and has accumulated $1.1 million in its asset base. It has an expense ratio of 0.60%. TRFK trades in a meager volume of nearly 2,000 shares per day on average and has a Zacks ETF Rank #3 (Hold).
VanEck Vectors Semiconductor ETF (SMH)
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which tracks the most-liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 25 stocks in its basket, with Nvidia occupying the top position at 14.5% (read: Nvidia, AI boom & Chip ETFs).
VanEck Vectors Semiconductor ETF has managed assets worth $8.5 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 7 million shares per day and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
The Spear Alpha ETF (SPRX)
The Spear Alpha ETF is an actively managed fund that invests in companies poised to benefit from breakthrough trends in industrial technology. The ETF’s objective is to find underappreciated opportunities across different industrial supply chains that are beneficiaries of secular themes such as enterprise digitalization, automation & robotics, artificial intelligence, environmental focus and decarbonization, photonics and additive manufacturing, and space exploration. The Spear Alpha ETF holds 23 stocks in its basket, with Nvidia taking the top spot at an 11.3% share.
The Spear Alpha ETF has accumulated $4.1 million in its asset base and charges 75 bps in annual fees. It trades in an average daily volume of 5,000 shares.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
Global X Robotics & Artificial Intelligence ETF follows the Indxx Global Robotics & Artificial Intelligence Thematic Index, which seeks investment in companies that stand to benefit from the increased adoption and utilization of robotics and AI, including those involved with industrial robotics and automation, non-industrial robots and autonomous vehicles (read: Artificial Intelligence ETF Hits New 52-Week High).
Global X Robotics & Artificial Intelligence ETF has 44 stocks in its basket, with NVIDIA occupying the second spot with an 11.9% share. The ETF has AUM of $2 billion and an average daily volume of 747,000 shares. It charges 69 bps in annual fees.
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