Nvidia (NVDA) has become a supernova in the tech stock universe over the past year, basking in the glow of analyst fervor for the artificial intelligence (AI) megatrend. A semiconductor behemoth, Nvidia is the mastermind behind chips that fuel the data meccas powering AI models like ChatGPT.
The insatiable hunger for these niche chips has catapulted Nvidia’s revenue from $26.9 billion in fiscal 2023 to $60.9 billion in fiscal 2024, culminating in a jaw-dropping surge. Embracing an asset-light strategy, Nvidia flexed its muscles by tripling adjusted earnings per share (EPS) in the last year.
The numbers tell a story of galactic proportions: NVDA has showered investors with a mind-boggling 517% return since the dawn of 2023. Its ascent over the past decade is nothing short of legendary, skyrocketing an otherworldly 19,710%. Today, Nvidia sits on the celestial throne as the third-largest U.S. company, sporting a colossal market cap of $2.1 trillion.
The staggering stock performance could suggest a lofty valuation, a potential harbinger of a looming regression. At 20.7 times forward sales and 39 times forward earnings, NVDA might appear steeply priced. Nonetheless, industry experts foresee a stratospheric 33.2% surge in adjusted EPS annually for the next half-decade, a stellar trajectory for a titan of Nvidia’s magnitude.
Decoding Nvidia’s Destination Price
Of the 39 Nvidia analysts in the arena, 34 rally for a “strong buy,” while two advocate a “moderate buy,” and three opt for a “hold.” The consensus target price for NVDA stands at $838.93, marking a 7% markdown from the current trading valor.
For investors eager to ride the Nvidia wave, one tantalizing avenue is through exchange-traded funds (ETFs) that harbor shares of a constellation of related companies. This approach offers a lifeline of diversification that can mitigate volatility associated with individual stock bets. Here are three stellar ETFs tailored for Nvidia enthusiasts.
1. VanEck Semiconductor ETF (SMH)
The beating heart of the VanEck Semiconductor ETF (SMH) resonates with the performance of the 25 premier semiconductor heavyweights gracing U.S. listings. Semiconductors serve as the bedrock of contemporary computing, indispensable for a wide spectrum of contraptions spanning smartphones, computers, and calculators.
As a cavalcade of new digital companions parades annually, the demand for semiconductor chips remains insatiable, painting the SMH ETF as a prime ticket for investors. Greasing the wheels of fortune, the SMH ETF has showered stakeholders with over 1,000% returns over the past decade, dividend riches included.
At the helm of the SMH ETF stands Nvidia, its top lodestar accounting for 26.2% of the treasure chest. Joining the luminous trail are fellow companions Taiwan Semiconductor (TSM), Advanced Micro Devices (AMD), Broadcom (AVGO), and ASML (ASML).
2. Global X Robotics & Artificial Intelligence ETF (BOTZ)
The Global X Robotics & Artificial Intelligence ETF (BOTZ) sets sail towards the shores blooming with companies poised to reap the spoils of AI, robotics, and automation adoption. Unfurling its banner in 2016, the ETF has hoisted a flag of 128% returns for investors, steering a course through $2.7 billion in total assets.
Eclipsed with a management fee of 0.68%, the BOTZ ETF may appear extravagant compared to its passive kin.
Nvidia claims the throne in the BOTZ ETF hierarchy, commanding a 21.5% stake in the crew. Rounding up the top 5 are mariners Intuitive Surgical (ISRG), ABB Ltd (ABBNY), Keyence (KYCCF), and UiPath (PATH).
3. iShares Robotics and Artificial Intelligence ETF (IRBO)
Completing our trifecta of ETF marvels is the iShares Robotics and Artificial Intelligence ETF (IRBO). This beacon of the future set sail in 2018, charting a course through a humble trove of less than $700 million in assets. Post-launch, the ETF steered a journey yielding about 54% ROI for shareholders, a modest bounty compared to the 354% plunder by the SMH ETF over the same stretch.
Diverging from its brethren, the IRBO ETF opts for an equal-weighting scheme, a safeguard against perils stemming from individual stocks. Nvidia plays a modest 1.5% role in the ensemble, sharing the limelight with other distinguished members such as Arm Holdings (ARM), Microstrategy (MSTR), AMD, DigitalOcean (DOCN), Meta Platforms (META), and Qualcomm (QCOM).