Despite the recent dip in artificial intelligence (AI) stocks, the long-term trend could continue to skew toward the upside. A strong spate of tech earnings could bolster AI further, opening up opportunities in semiconductors.
Amazon recently announced its earnings, beating Wall Street expectations, as the online retailer now turns its attention to AI. Per a Fox Business report, Amazon’s CEO noted that its focus will not be on AI innovations in order to compete with other big tech peers like Microsoft.
Of course, one of the prime beneficiaries of the AI investment theme is Nvidia. Though the stock has dipped 9% within the past month, it’s up 70% for the year. It could have more room to run given the demand for AI-focused chips, as adoption of the technology continues.
“The primary story in semis in recent quarters has been the massive rise in revenue in AI accelerators, led by Nvidia’s Data Center GPU business,” said Brian Colello, technology equity strategist for Morningstar. “We surmise that a wide array of businesses are seeking to build and deploy AI models, and such investments will occur in good times or bad. We think more stellar demand for Nvidia’s AI products is in the cards for 2024, as demand should continue to outpace supply in the next few quarters.”
Furthermore, Nvidia’s strength doesn’t appear to be waning anytime soon. Even for long-term investors, Nvidia also presents a prime growth play.
“We expect it to more than double in 2024…. Given massive AI investments and supply constraints, we foresee Nvidia’s GPU revenue as locked in for most, if not all, of 2024, and perhaps 2025 as well,” Colello added.
2 Options to Trade Tech ETFs
Given the upside, traders who want to add additional leverage to their plays on Nvidia can take a look at single-stock exchange-traded funds like the Direxion Daily NVDA Bull 2X Shares (NVDU) as part of their arsenal of market tools. As mentioned, the fund doubles exposure to the stock to extract more profits should Nvidia continue its upward momentum.
For more broad play on the semiconductor space, traders will want to look at the Direxion Daily Semiconductor Bull and Bear 3X Shares (SOXL). The fund tracks the largest movers and shakers within the industry. SOXL seeks daily investment results equal to 300% of the daily performance of the NYSE Semiconductor Index. That index is a rules-based, modified float-adjusted market capitalization-weighted index that tracks the performance of the 30 largest U.S.-listed semiconductor companies.
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