Nvidia Overtakes Amazon in Market Value: ETFs to Tap

Nvidia NVDA experienced a record-breaking surge fueled by an artificial intelligence (AI) frenzy and analysts’ bullish view. After the biggest monthly increase ever in market value in January, the chipmaker overtook Amazon AMZN at $1.78 trillion and became the fourth-most valuable company in the United States.

Investors can tap the strength with the help of ETFs having the largest allocation to Nvidia. These include VanEck Vectors Semiconductor ETF SMH, AXS Esoterica NextG Economy ETF WUGI, Global X Robotics & Artificial Intelligence ETF BOTZ, MeetKevin Pricing Power ETF PP and Pacer Data and Digital Revolution ETF TRFK.

Nvidia stock has risen about 47% so far in 2024 and is by far the biggest outperformer among the so-called “Magnificent Seven.”

AI Boom

A key factor driving the surge is Nvidia's dominant position in the AI sector. The world’s largest chipmaker continues to benefit from the explosive demand for its cutting-edge chips used in AI applications, which are used to power ChatGPT and many similar services. It 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 (read: Should You Buy Nvidia After Its Huge Run? ETFs in Focus).

In January, the premier AI chip manufacturer announced the launch of new GeForce graphic processors for AI-equipped laptops and PCs at CES. It also revealed that its automated driving system is being adopted in electric vehicles, with Li Auto and other EV companies integrating Nvidia Drive Thor into their fleets.

Analysts Bullish View

Nvidia currently has an average brokerage recommendation (ABR) of 1.21 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 39 brokerage firms. The current ABR compares to an ABR of 1.23 a month ago based on 37 recommendations.

Of the 39 recommendations deriving the current ABR, 34 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 87.18% and 5.13% of all recommendations. A month ago, Strong Buy made up 83.78%, while Buy represented 8.11%.

Most of the analysts raised the price target on Nvidia ahead of its quarterly earnings release on Feb 21, which is expected to come in stronger than expected. Morgan Stanley raised its price target to $750, while Goldman and Bank of America hiked the price target to $800. Meanwhile, Melius Research boosted the price target for Nvidia even higher to $920 from $750. Based on short-term price targets offered by 37 analysts, the average price target for Nvidia comes to $675.52. The forecasts range from a low of $410.00 to a high of $1,100.00.

Earnings Surprise in the Cards?

Nvidia currently has a Zacks Rank #2 (Buy) and an Earnings ESP of +5.26%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This largest chipmaker saw a positive earnings estimate revision of a couple of cents over the past seven days for the fourth quarter of fiscal 2024. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Nvidia is expected to post massive earnings and revenue growth of 412.5% and 233.52%, respectively, for the to-be-reported quarter.

Further, Nvidia has a top Growth Score of A, indicating it has strong growth prospects despite the fact the stock is trading at a higher P/E ratio of 35.62 versus 26.52 for the industry.

ETFs to Tap

Let’s delve into each ETF below:

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, which tracks the most liquid companies in the industry based on market capitalization and trading volume. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket, with Nvidia occupying the top position at 24.5%.  

VanEck Vectors Semiconductor ETF has managed assets worth $14.2 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 #1 with a High risk outlook (read: 5 Sector ETFs Beating the Market Halfway Through Q1).

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 33 stocks in the basket, with Nvidia occupying the top position at 18.9%.

AXS Esoterica NextG Economy ETF has accumulated $29.1 million in its asset base and charges 75 bps in fees per year. It trades in an average daily volume of 2,000 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 in industrial robotics and automation, non-industrial robots and autonomous vehicles.

Global X Robotics & Artificial Intelligence ETF has 42 stocks in its basket, with Nvidia occupying the top spot with a 19.9% share. The ETF has AUM of $2.4 billion and an average daily volume of 1.2 million shares. It charges 69 bps in annual fees.

MeetKevin Pricing Power ETF (PP)

MeetKevin Pricing Power ETF is an actively managed ETF that seeks to achieve its investment objective by investing primarily in U.S.-listed equity securities of Innovative Companies, which, in Kevin’s view, have more “pricing power” than their peers. The fund holds a small basket of 16 stocks, with Nvidia occupying the third position at 14.3%.

MeetKevin Pricing Power ETF has accumulated $41.5 million in its asset base. It charges 77 bps in annual fees and trades in a lower volume of 12,000 shares a day on average.

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 79 stocks in its basket. Out of these, Nvidia is the top firm, accounting for a 12% share.

Pacer Data and Digital Revolution ETF has accumulated $20.7 million in its asset base. It has an expense ratio of 0.60%. TRFK trades in a meager volume of about 9,000 shares per day on average.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

VanEck Semiconductor ETF (SMH): ETF Research Reports

Global X Robotics & Artificial Intelligence ETF (BOTZ): ETF Research Reports

The Meet Kevin Pricing Power ETF (PP): ETF Research Reports

AXS Esoterica NextG Economy ETF (WUGI): ETF Research Reports

Pacer Data and Digital Revolution ETF (TRFK): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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