Photo by BoliviaInteligente on Unsplash

Investors' favorite Nvidia (NVDA) is set to release second-quarter fiscal 2024 results on Aug 23, after market close.

This graphics chipmaker, currently the world’s most valuable semiconductor company, has been at the forefront of the rally in technology stocks this year, skyrocketing more than 200%. The rally was driven by optimism about the potential of artificial intelligence and the demand for components necessary to power the technology. Notably, Nvidia stock has risen about 39%, much higher than the industry average of 17.2%.

The outperformance is expected to continue given that the chipmaker is likely to come up with earnings beat in its Q2 report. Additionally, Wall Street analysts have turned more bullish ahead of the chipmaker’s quarterly earnings report. Given this, ETFs having the largest allocation to Nvidia could make compelling plays ahead of its earnings report. These include VanEck Vectors Semiconductor ETF, AXS Esoterica NextG Economy ETF, Global X Robotics & Artificial Intelligence ETF, Pacer Data and Digital Revolution ETF and The Spear Alpha ETF.

Earnings Whispers

Nvidia currently has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +2.39%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) 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 videogame-gear specialist saw no earnings estimate revision over the past 30 days for the second quarter of fiscal 2024. Nvidia’s earnings surprise history is good as it delivered an earnings surprise of 0.26%, on average, in the last four quarters. Nvidia is expected to post earnings and revenue growth of 303.9% and 64.6%, respectively, for the to-be-reported quarter.

Nvidia currently has an average brokerage recommendation (ABR) of 1.24 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 35 brokerage firms. The current ABR compares to an ABR of 1.24 a month ago based on 35 recommendations.

Of the 35 recommendations deriving the current ABR, 29 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 82.86% and 8.57% of all recommendations. A month ago, Strong Buy made up 82.86%, while Buy represented 8.57%.

Based on short-term price targets offered by 33 analysts, the average price target for Nvidia comes to $489.55. The forecast ranges from a low of $215.00 to a high of $600.00.

What’s Hot?

Analysts are bullish on the chipmaker as most of them like Oppenheimer, UBS, Raymond James, Wells Fargo raised the price target on Nvidia ahead of its earnings.

Nvidia became the world’s ninth public company and the first chipmaker to ever hit the trillion level at the end of May. The chipmaker is seeing explosive demand for its cutting-edge chips used in AI applications, which are used to power ChatGPT and many similar services, and 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.

For the second quarter of fiscal 2024, the graphics chipmaker expects revenues of around $11 billion, plus or minus 2%, on increased demand for its data-center family of products, including H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU, sparked by the AI boom.

On the Q1 earnings call, Nvidia CEO Jensen Huang said the company is seeing “surging demand” for these products and is “significantly increasing” supply. The company is boosting supply to meet surging demand for its artificial intelligence chips, which are used to power ChatGPT and many similar services.

ETFs in Focus

Let’s delve into each ETF below:

VanEck Vectors Semiconductor ETF (SMH)

VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH 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 20.3%.  

VanEck Vectors Semiconductor ETF has managed assets worth $9.4 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 6.7 million shares per day and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

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 occupying the top position at 18.9%.

AXS Esoterica NextG Economy ETF has accumulated $21.3 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 with industrial robotics and automation, non-industrial robots and autonomous vehicles.

Global X Robotics & Artificial Intelligence ETF has 43 stocks in its basket, with NVIDIA occupying the second spot with a 14% share. The ETF has AUM of $2.2 billion and an average daily volume of 1.5 million shares. It charges 69 bps in annual fees.

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 81 stocks in its basket. Out of these, Nvidia is the top firm, accounting for a 10.7% share. Semiconductors take the largest share at 33.8%, while system software and communication equipment round off the next two spots.

Pacer Data and Digital Revolution ETF debuted in June last year and has accumulated $1.1 million in its asset base. It has an expense ratio of 0.60%. TRFK trades in a meager volume of under 1000 shares per day on average.

The Spear Alpha ETF (SPRX)

The Spear Alpha ETF is an actively managed fund that invests in companies poised to benefit from breakthrough trends in industrial technology. The ETF’s objective is to find underappreciated opportunities across different industrial supply chains that are beneficiaries of secular themes such as enterprise digitalization, automation & robotics, artificial intelligence, environmental focus and decarbonization, photonics and additive manufacturing, and space exploration. The Spear Alpha ETF holds 25 stocks in its basket, with Nvidia taking the top spot at 9.4% share.

The Spear Alpha ETF has accumulated $11.2 million in its asset base and charges 75 bps in annual fees. It trades in an average daily volume of 33,000 shares.

More By This Author: