AI Theme 'Skyrockets', ETFs 'Attracting a Gold Rush': Who Will Be the Next NVIDIA?
NVIDIA Corporation NVDA | 207.06 | +3.72% |
VanEck Vectors Semiconductor ETF SMH | 502.44 | +4.27% |
GraniteShares 2x Long NVDA Daily ETF NVDL | 101.08 | +7.24% |
T-Rex 2X Long NVIDIA Daily Target ETF NVDX | 19.34 | +7.38% |
Semiconductor Bull 3X Direxion SOXL | 125.37 | +11.17% |
NVIDIA Corporation(NVDA.US)'s latest extraordinary earnings have brought a huge fortune to investors.
On Wednesday, Eastern Time, NVIDIA's latest earnings report showed that its Q4 revenue for fiscal year 2024 increased by 265% year-over-year, and earnings per share surged by 765% year-over-year. The company's revenue and profit have set records for three consecutive quarters.
Due to the fourth-quarter performance and first-quarter earnings guidance exceeding analysts' expectations, the company's stock price soared by 10% in after-hours trading on Wednesday.
Even more notably, NVIDIA's stock price surged by 16.4% at the close on Thursday, setting a new record high for the stock price and increasing the market value by $277 billion. Since the beginning of 2024, NVIDIA has already gained nearly 60%.
Industry ETFs Attracting Fierce Capital Inflows, AI Dividend May Be Far From Over
While the market focuses on NVIDIA itself, some funds are also hotly traded in another "battlefield" - ETFs.
VanEck Vectors Semiconductor ETF(SMH.US) attracted about $324 million in funds before NVIDIA released its earnings on Wednesday, and rose nearly 7% on Thursday. This was its largest single-day gain since May last year.
Approximately a quarter of VanEck Semiconductor ETF's funds are invested in NVIDIA. After inflowing $612 million in three days, the size of the ETF has increased to over $15 billion, potentially setting the largest weekly fund inflow since October 2022.
Moreover, ETFs that bet on NVIDIA stocks with leverage performed even better.
The trading volume of GraniteShares 1.5x Long NVDA Daily ETF(NVDL.US) soared to a record of over 3 million shares, surging by 32.34%, and has accumulated a gain of 117.18% so far this year. This $660 million fund has received the largest monthly fund inflow since its establishment in 2022, totaling $236 million this month.
The T-REX 2X LONG NVIDIA DAILY TARGET ETF(NVDX.US) with a similar investment strategy soared by over 30% on Thursday. As of the time of writing, the year-to-date gain is 134.56%.
Similarly, investors have net added $405 million to the 8.6 billion Semiconductor Bull 3X Direxion(SOXL.US), which offers a return that is three times that of the index including NVIDIA.
The Semiconductor Industry Association (SEMI) and semiconductor research institute Tech Insights recently released a semiconductor manufacturing monitoring report showing that sales of electronic products and integrated circuits (ICs) increased in the fourth quarter of 2023, and the global semiconductor manufacturing industry is expected to recover in 2024.
SEMI predicts that after a significant decline in semiconductor capital expenditures and wafer fab utilization in the second half of 2023, it is expected to moderately recover from the first quarter of 2024.
Leading global consulting firm McKinsey believes that AI-related applications will bring an annual growth of $2.6 to $4.4 trillion to the global economy. According to Allianz, generative AI is expected to grow rapidly at an annual rate of 27% over the next decade.
With ongoing semiconductor and AI advancements, the sector's rewards are far from over.
NVIDIA's founder, Jensen Huang, stated, "Generative AI is a new application. It is enabling a new way of creating software. It's a new way of computing that is driving our growth. We are diversifying into new industries, automotive, healthcare, robotics, financial services... A series of industries worth billions of dollars are embracing our generative AI."
What Other Opportunities Are There?
Looking at the entire integrated circuit industry chain:
- the upstream includes semiconductor materials, equipment, and EDA tools;
- the midstream consists of the three key stages of chip design, manufacturing, and packaging and testing (i.e., the process of creating a chip from nothing);
- the downstream application areas include consumer electronics, communications, industrial, data centers, automotive electronics, etc.
NVIDIA, which is currently the hottest, is one of the most representative companies in "chip design".
| Related Fields | Stock Code |
| EDA (Electronic Design Automation, providing software support for chip design companies) | Cadence Design Systems, Inc.(CDNS.US) |
| Synopsys, Inc.(SNPS.US) | |
| Chip Design | NVIDIA Corporation(NVDA.US) |
| Advanced Micro Devices, Inc.(AMD.US) | |
| QUALCOMM Incorporated(QCOM.US) | |
| Broadcom Limited(AVGO.US) | |
| Chip Materials | Applied Materials, Inc.(AMAT.US) |
| Dow Chemical Company(DOW.US) | |
| Wolfspeed(WOLF.US) | |
| Chip Equipment | ASML Holding NV ADR(ASML.US) |
| Lam Research Corporation(LRCX.US) | |
| Chip Manufacturing | Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR(TSM.US) |
| United Microelectronics Corp. Sponsored ADR(UMC.US) | |
| Chip Packaging and Testing | Advanced Semiconductor Engineering, Inc. Sponsored ADR(ASX.US) |
| Amkor Technology, Inc.(AMKR.US) |
Semiconductor-related ETFs:
| Index/Stock | Code | Direction/Leverage |
|---|---|---|
| Philadelphia Semiconductor ETF | PHLX Sox Semiconductor Sector Ishares(SOXX.US) | Long (1x) |
| Semiconductor ETF - VanEck | VanEck Vectors Semiconductor ETF(SMH.US) | Long (1x) |
| S&P Semiconductor ETF - SPDR | Spdr Series Trust Spdr S&P Semiconductor ETF(XSD.US) | Long (1x) |
| Nasdaq Semiconductor ETF | First Trust Nasdaq Semicondu(FTXL.US) | Long (1x) |
| 3x Long Semiconductor ETF | Semiconductor Bull 3X Direxion(SOXL.US) | Long (3x) |
| 3x Short Semiconductor ETF | Daily Semiconductor Bear 3x Shares(SOXS.US) | Short (3x) |
Limited funds but don't want to miss out on the tech stock market? Consider the following tech stock-related ETFs:
Risk Warning: Investing in leveraged ETFs magnifies both gains and losses by the same multiple. For instance, with a 2x leveraged ETF, if the underlying asset rises or falls by 1%, it might increase or decrease by 2%. Investors should be particularly aware of the risks associated with such investments.