Sometimes, there’s safety in size. Semiconductor Goliath Nvidia (NVDA) is proving as much. Already one of the world’s largest companies by market capitalization, Nvidia is up 29.5% year-to-date. That extends a five-year run in which the stock surged 1,066%.
Numbers such as those may imply that additional near-term gains may be limited. However, that perspective has frequently been applied to Nvidia only for the stock to continue grinding higher. Nvidia’s track record of turning big gains into even larger ones is one reason risk-aware traders may want to evaluate the Direxion Daily NVDA Bull 2X Shares (NVDU).
Indeed, there’s momentum for this stock and the Direxion ETF. The fund attempts to deliver 200% of the daily performance of the chip stock. On Monday, BNP Paribas, citing AI-fueled growth, lifted its price target on Nvidia to $345 from $285. The stock traded around $241 at this writing. So if the BNP Paribas price objective is accurate, occasional use of the leveraged NVDU could reward short-term traders.
Still One of the Best
Adding to the case for Nvidia stock and NVDU, though not as a buy-and-hold tool, is the point that some market observers view the semiconductor stock as undervalued. For example, Morningstar’s fair value estimate on the shares is $310. That’s well ahead of where the stock currently resides. Something else that’s clear is Nvidia’s competitive positioning is a force to be reckoned with.
“Nvidia has a wide economic moat, thanks to its market leadership in graphics processing units, hardware, software, and networking tools needed to enable the exponentially growing market around artificial intelligence,” observed Morningstar’s Brian Colello. “In the long run, we expect tech titans to strive to find second sources or in-house solutions to diversify away from Nvidia in AI, but these efforts will, at best, only chip away at Nvidia’s AI dominance.”
