NVIDIA Overtakes Apple: ETFs to Tap the Incredible Growth Story
NVIDIA NVDA has been on an explosive surge with no signs of a slowdown, fueled by the artificial intelligence (AI) frenzy and blockbuster earnings. The chipmaker overtook Apple AAPL, topping $3 trillion in market cap and becoming the second-most valuable company in the United States. NVIDIA hit the $1 trillion mark in May 2023 and reached $2 trillion by February 2024, surpassing Amazon and Alphabet.
Investors can tap into its incredible growth with the help of ETFs that have the largest allocation to this AI darling. These include Strive U.S. Semiconductor ETF SHOC, AXS Esoterica NextG Economy ETF WUGI, VanEck Vectors Semiconductor ETF SMH, Grizzle Growth ETF DARP and TrueShares Technology, AI and Deep Learning ETF LRNZ. All these funds have NVIDIA as the top holding with a large concentration.
The latest catalyst in driving the growth is the stock split and the fervor surrounding the next-generation AI chips. The solid trend is likely to continue.
NVIDIA sparked a retail frenzy on the 10-for-1 stock split news. At the end of the week, NVDA will undergo a 10-for-1 stock split, which will make its shares more affordable to a wider range of investors, including the ones who make small trades, and increase liquidity. In a stock split, the company increases the number of shares, reducing the share price. However, the total dollar value of all shares outstanding remains the same and doesn’t affect the company’s valuation (read: ETFs to Tap on 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, like Amazon (AMZN), which joined the index earlier this year after undergoing a 20-for-1 stock split in June 2022.
NVIDIA has been the biggest beneficiary of the AI boom. Last weekend, the AI chipmaker unveiled a high-powered version of its Blackwell chip — called the Blackwell Ultra — slated to release in 2025, followed by a new AI chip platform, Rubin, in 2026. The company will debut an Ultra version of Rubin in 2027. Its first Blackwell processors are slated for delivery later this year, replacing the widely popular Hopper generative AI chips.
Companies like Microsoft, Meta Platforms and Alphabet are rapidly expanding their AI computing capabilities, boosting NVIDIA's growth. NVIDIA has an estimated 80% market share in AI chips for data centers, which are attracting billions of dollars in spending from big cloud vendors.
Further, Elon Musk recently announced that AI start-up xAI's supercomputer will run on NVIDIA technology. This week, Foxconn announced its plans to build an advanced computing center in Taiwan using NVIDIA's Blackwell chips. These are expected to provide a further boost to the company’s growth prospects.
Bulls Are Here
Wall Street analysts are going more bullish on NVIDIA and continue to boost their price targets. This week, Bank of America called NVIDIA a "top pick," reiterating its buy rating on the stock and raising its price target to $1,500 from $1,320. As the chipmaker is accelerating its product upgrade cycle, the analyst believes the move will "continue to bolster NVIDIA’s AI leadership position."
Driven by explosive growth prospects, Wall Street analysts have turned more bullish on NVIDIA and raised the target price on the stock post-earnings. At least 28 of the 58 brokerage firms have raised their price targets on the stock, pushing up the median view to $1,200, according to the recent LSEG data.
NVIDIA currently has an average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 41 brokerage firms. The current ABR compares to an ABR of 1.20 a month ago based on 40 recommendations.
Of the 41 recommendations deriving the current ABR, 36 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 87.8% and 4.88% of all recommendations. A month ago, Strong Buy made up 87.5%, while Buy represented 5%.
Attractive Valuations
NVIDIA stock has risen more than 140% this year and 200% over the past year. It is by far the biggest outperformer among the so-called “Magnificent Seven.” However, its valuation does not seem overstretched, given that its earnings are growing faster than the share price. NVIDIA is currently trading at a P/E ratio of 42.85 versus 47.81 for Advanced Micro Devices AMD (read: AMD-Nvidia ETFs in Focus Amid New Chip Introductions).
ETFs to Tap
Strive U.S. Semiconductor ETF (SHOC)
Strive U.S. Semiconductor ETF seeks broad market exposure to the U.S. semiconductor sector. It follows the Bloomberg US Listed Semiconductors Select Total Return Index and holds 32 stocks in its basket, with NVIDIA accounting for 31.9% of the assets. Strive U.S. Semiconductor ETF has AUM of $71.4 million and charges 40 bps in annual fees. It trades in a volume of 13,000 shares per day on average and has a Zacks ETF Rank #2 (Buy).
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 31 stocks in the basket, with NVIDIA making up for a 26.1% share. AXS Esoterica NextG Economy ETF has accumulated $29.5 million in its asset base and charges 75 bps in fees per year. It trades in a volume of 32,000 shares a day on average.
VanEck Vectors Semiconductor ETF (SMH)
VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It follows the MVIS US Listed Semiconductor 25 Index and holds 26 stocks in its basket, with NVIDIA accounting for 24.5% of the total assets. VanEck Vectors Semiconductor ETF has managed assets worth $20.5 billion and charges 35 bps in annual fees and expenses. SMH has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
Grizzle Growth ETF (DARP)
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 Digitization and Cloud Computing, Future Media and Entertainment, Health and Wellness, and Sustainability and Energy Transition. Grizzle Growth ETF holds 41 stocks in its basket, with NVIDIA making up 24.2% of the assets. It has accumulated $14.1 million in its asset base and charges 75 bps in annual fees (read: AI Boom Bolsters NVIDIA's Q1 Growth: ETFs to Tap).
TrueShares Technology, AI and Deep Learning ETF (LRNZ)
TrueShares Technology, AI and Deep Learning ETF is an actively managed fund targeting companies that are significantly involved in the application of high levels of artificial intelligence. It holds 23 stocks in its basket, with NVIDIA making up for a 17.8% share. LRNZ has amassed $41.3 million in its asset base and trades in an average daily volume of 8,000 shares. It charges 69 bps in fees per year.
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Apple Inc. (AAPL) : Free Stock Analysis Report
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VanEck Semiconductor ETF (SMH): ETF Research Reports
TrueShares Technology, AI and Deep Learning ETF (LRNZ): ETF Research Reports
AXS Esoterica NextG Economy ETF (WUGI): ETF Research Reports
Strive U.S. Semiconductor ETF (SHOC): ETF Research Reports
Grizzle Growth ETF (DARP): ETF Research Reports