Chicago, IL – November 19, 2024 – Zacks.com announces the list of Stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: NVIDIA Corporation NVDA, Intel Corporation INTC, Taiwan Semiconductor Manufacturing Company Limited TSM, Apple Inc. AAPL, Microsoft Corporation MSFT, and Amazon.com, Inc. AMZN.
Here are highlights from Monday’s Analyst Blog:
Why NVIDIA Joined the Dow, and Why It's Time to Buy
NVIDIA Corporation’s graphic processing units (GPU) were once sought-after among gamers but are now the key players in the artificial intelligence (AI) market, leading to the company being added to the Dow Jones Industrial Average. Does this make NVIDIA an enticing buy, or is there more to watch closely before making a bet? Let’s see –
NVIDIA Replaces Intel in the Dow
This month, Intel Corporation, the tech industry titan, lost its place in the Dow after 25 years. Intel lost its competitive edge over arch-rival Taiwan Semiconductor Manufacturing Company Limited and failed to use the AI boom. Intel’s management recently confirmed that the company may not achieve the estimated $500 million annual Gaudi AI revenues, a modest target compared to its peers.
NVIDIA ousted Intel and joined the Dow as it became the backbone of the global semiconductor industry. NVIDIA’s chips have successfully powered generative AI technologies, helping the company’s shares jump 186.8% this year. In contrast, Intel’s shares have plummeted 51.5% this year.
Why is NVIDIA Being Added to the Dow?
The 30-stock Dow generally represents the broader economy, primarily focusing on energy and heavy industrial stocks. However, tech stocks have become an increasingly dominant force in the economy. As a result, tech behemoths such as Apple Inc., Microsoft Corporation, and Amazon.com, Inc. are already listed on the Dow.
NVIDIA joined the Dow to ensure maximum representation of the burgeoning semiconductor industry. After all, with a market capitalization of $3.6 trillion, it is the largest company trading on the U.S. bourses and the biggest provider of chips and related technologies to boost AI proficiencies.
NVIDIA’s 10-for-1 stock split also cleared the way for the semiconductor giant to be added to the Dow. This is because the Dow is a price-weighted index and stocks that trade at a higher price affect the Dow more than those that trade at lower prices.
Before the stock split, NVIDIA’s shares were trading above $900 a share, which was too pricey to have been added to the Dow. However, after the split, NVIDIA’s shares are now trading at a reasonable price, slightly above $140 per share (read more: NVIDIA Stock Post 3-Month Split: Buy, Hold, or Sell?).
NVIDIA to Benefit From its Addition to the Dow
Adding hot stocks in indexes in the wake of big runs may not necessarily lead to an uptick in the share price. For instance, Intel’s shares have fallen about 36% after being added to the Dow in 1999. Similarly, Super Micro Computer, Inc.’s addition to the S&P 500 at the beginning of the year didn’t help the stock notch year-to-date gains.
However, the case for NVIDIA is different. NVIDIA’s Dow membership means that various mutual funds and exchange-traded funds (ETFs), which track the Dow will buy its shares. The increase in demand would jack up NVIDIA’s stock price.
More Reasons to be Bullish on NVIDIA
The upcoming launch of NVIDIA’s much-awaited Blackwell processors is expected to be a tailwind for the semiconductor giant. CEO Jensen Huang confirmed that the demand for B200 chips is insane for the fourth quarter and is expected to be even higher in 2025. Amazon Web Services, Microsoft, Meta and Tesla, to name a few, are likely to adopt the Blackwell chips.
The new Blackwell chips have more AI throughput than the present Hopper H100 chips. The Blackwell platform is expected to boost AI training performance more than Hopper and can train large language models at a lower cost.
NVIDIA’s dominance in the AI chip market, more so due to the arrival of Blackwell chips, paves the way for a long-term rise in its share prices. NVIDIA’s CUDA software platform is more popular than Advanced Micro Devices, Inc.’s ROCm software platform. NVIDIA, at the moment, enjoys a bulk of the GPU market space.
NVDA Stock to Buy Hand Over Fist
NVIDIA’s entry into the Dow, the release of new Blackwell chips, and its solid GPU market position should boost its share price. Collectively, brokers have increased the average short-term price target of the NVDA stock by 5.9% to $155.43 from the last closing price of $146.76. The highest short-term price target is $200, an upside of 36.3%.
NVDA stock trades above the short-term 50-day moving average (DMA) and long-term 200-DMA, signaling a bullish trend, making it a good investment option.
Moreover, per price/earnings, the NVDA stock trades at 50.1X forward earnings, less than the Semiconductor - General industry’s forward earnings multiple of 58.5X. Therefore, buying the stock will burn a smaller hole in your wallet than its peers.
NVIDIA rightfully has a Zacks Rank #1 (Strong Buy). The $2.83 Zacks Consensus Estimate for NVIDIA’s earnings per share is up 43.7% from a year ago. You can see the complete list of today’s Zacks Rank #1 stocks here.
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