Nvidia Stock: 4 Ways to Supercharge Your Gains While Hedging Against Risk

  • Stock Market Analysis
  • Editors Pick
  • Nvidia stock is always at the center of attention for the media and investors.
  • However, there's concern that its current trading prices might exceed its actual value, making many hesitant to buy at current levels.
  • Let's explore a straightforward method to invest in Nvidia while also reducing the risk in case it drops.
  • Investing in the stock market and want to get the most out of your portfolio? try InvestingPro. Sign up NOW and take advantage of up to 38% off for a limited time on your 1-year plan!

Nvidia (NASDAQ: NVDA ) is a top pick among investors and it's obvious — just look at its market cap, which is now worth more than the entire German stock market.

Strong demand for the stock is evident from its remarkable surge of +223% over the past 12 months, highlighting its popularity with investors.

But let's not oversimplify by attributing everything to its impressive performance alone.

Nvidia's YTD rise of +76% is notable, yet two other stocks are outpacing it by a wide margin: Super Micro Computer (NASDAQ: SMCI ) with a staggering +227% return and MicroStrategy (NASDAQ: MSTR ) with gains of +140%.

Below is a comparison chart of the three stocks' performance in 2024, with Nvidia represented by the red line.

Nvidia Vs. MicroStrategy Vs. Super Micro

Nvidia reports results on May 22. The following chart shows actual revenue forecasts for the remaining three quarters of 2024 (up 9.7%, 9% and 8.7% respectively).

Nvidia Forecasts

Source: InvestingPro

As for EPS (earnings per share) for the next three quarters, the forecasts are for an increase of 6.7%, 6.9% and 8.6% respectively.

Nvidia Forecasts

Source: InvestingPro

The market consensus gives it potential at $971.46 from $871.33 at the close of the last trading session. In contrast, InvestingPro models estimate that it trades above its target value of $784.

Nvidia Fair Value

Source: InvestingPro

Just a few days ago, Saxo Bank cautioned that the hype surrounding artificial intelligence, evident in the soaring stock prices of companies like Nvidia and Novo Nordisk (NYSE: NVO ), may be overstated due to inflated company valuations.

While some investors are hesitant to buy Nvidia shares at these high prices, they still want to capitalize on any potential gains. At first glance, it might seem challenging to profit from Nvidia's stock surge without actually buying its shares.

However, there is a solution.

Instead of investing directly in Nvidia, there are ETFs available that offer significant exposure to Nvidia along with other semiconductor stocks. This approach allows for a diversified portfolio and minimized risk. Let's explore some of these ETF options:

1. VanEck Semiconductor

The VanEck Semiconductor ETF (NASDAQ: SMH ) consists of semiconductor companies from various parts of the world that are listed in the United States.

The ETF charges a fee of 0.35%. Any dividends earned by the ETF are reinvested.

This ETF is quite large, managing $1.669 billion in assets. It was established on December 1, 2020, and is based in Ireland.

Over the past 3 years, it has yielded 85.45%, while its 1-year yield stands at 69.64%. Some of its top holdings include:

  • Nvidia (it has the largest weighting, 11.39%).
  • Broadcom (NASDAQ: AVGO )
  • ASML Holding NV (AS: ASML ) ADR (NASDAQ: ASML )
  • Taiwan Semiconductor Manufacturing (NYSE: TSM )
  • AMD (NASDAQ: AMD )
  • Intel (NASDAQ: INTC )
  • Qualcomm Incorporated (NASDAQ: QCOM )
  • Texas Instruments (NASDAQ: TXN )
  • Applied Materials (NASDAQ: AMAT )
  • Lam Research (NASDAQ: LRCX )

2. iShares Semiconductor

The iShares Semiconductor ETF (NASDAQ: SOXX ) has a decent level of diversification is present in this product as it holds close to 125 securities in total.

Its expense ratio is 0.35%, and the fund manages about $1.2B in assets. The YTD returns are 15%.

The top holdings include:

  • Nvidia with 8.72%.
  • Broadcom Inc. with 8.07%.
  • Advanced Micro Devices, Inc. with 6.94%.
  • QUALCOMM Incorporated with 6.65%.
  • Intel Corporation with 5.50%.
  • Micron Technology (NASDAQ: MU ), Inc. with 5.35%.
  • Microchip Technology Incorporated (NASDAQ: MCHP ) with 4.08%.

3. iShares MSCI Global Semiconductors ETF

The iShares MSCI Global Semiconductors UCITS ETF USD Acc (LON: SEMI ) consists of semiconductor companies from 23 developed and 24 emerging markets.

The annual fee is 0.35% and dividends are accrued and reinvested in the ETF.

It manages 1.05 billion, was born on August 3, 2021, and is based in Ireland.

The 1-year yield is 57.57%. The main stocks with the highest weight are:

  • Broadcom
  • ASML
  • Nvidia (its weight is 8.07%)
  • AMD
  • TSM
  • QUALCOMM
  • Texas Instruments
  • Applied Materials
  • Intel
  • Lam Research

4. HSBC Nasdaq Global Semiconductor (HNSC)

The HSBC NASDAQ Global Semiconductor UCITS ETF USD (LON: HNSC ) replicates the Nasdaq Global Semiconductor index which is comprised of companies from around the world operating in the semiconductor industry.

The annual fee is 0.35% and dividends are accrued and reinvested in the ETF.

It is a small ETF created on January 25, 2022, and is domiciled in Ireland.

Its 1-year yield is 62.51%. The stocks with the highest weight are:

  • Nvidia: its weight is 9.21%.
  • ASML
  • Broadcom
  • AMD
  • TSM
  • QUALCOMM
  • Applied Materials
  • Texas Instruments
  • Intel
  • Lam Research

The European Union and the United States have agreed to extend their cooperation agreements for three years.

These agreements aim to identify issues within chip supply chains and closely monitor China's dominance in less advanced chips found in everyday products.

It is estimated that around 60% of new chips entering the market in the coming years will be produced in China.

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Disclaimer: The author does not own any of these shares. This content, which is prepared for purely educational purposes, cannot be considered as investment advice.

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