Nvidia's Soaring Stock Price Prompts Analysts To Suggest A Diversified Portfolio Approach: Tech Giant's 'Dominant Market Share Position Will Be Tested'

The recent surge in NVIDIA Corp‘s NVDA stock price has led some analysts to caution investors about the company’s future growth prospects. This has prompted them to suggest alternative investments for a more balanced portfolio.

What Happened: The AI-driven boom of Nvidia has been reflected in its recent earnings, which surpassed expectations. This led to the company’s shares crossing the $1,000 mark for the first time, reported CNBC on Sunday.

Despite this, some analysts are concerned about a potential slowdown in growth, particularly in the latter part of the year. Lucas Keh, an analyst at Third Bridge, highlighted the impending shift of AI workloads in the cloud from training to inference, which could challenge Nvidia’s dominant market position.

"When the majority of AI workloads in the cloud move over from training to inference, Nvidia's dominant market share position will be tested. Most use cases in inference do not require the depth/amount of computing provided by Nvidia's top GPUs," he said.

Nancy Tengler, Chief Investment Officer at Laffer Tengler Investments, also expressed her surprise at the stock’s performance following the earnings report, suggesting that the market may have already priced in the positive results.

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These concerns have led some analysts to suggest diversifying portfolios by considering alternative investments with low correlation to Nvidia. Four exchange-traded funds were identified using FactSet, which have shown a negative or low correlation to Nvidia in the past month.

These ETFs are Vanguard S&P 500 Growth ETF VOOG, Schwab U.S. Large-Cap Growth ETF SCHG, Vanguard Russell 1000 Growth ETF VONG, and Fidelity Covington Trust Fidelity Enhanced Large Cap Growth ETF FELG.

Why It Matters: Nvidia’s recent performance has been nothing short of remarkable. The company’s first-quarter earnings report indicated its pivotal role in the global AI industry, with its technology being at the forefront of the “Sovereign AI” wave.

Moreover, the company’s potential inclusion in the Dow Jones Index has been a hot topic, with experts suggesting that it’s only a matter of time before Nvidia replaces Intel Corp INTC.

Despite these positive indicators, the concerns raised by analysts highlight the need for a diversified investment approach. This is particularly important given the staggering market cap of Nvidia, which has even caught the attention of tech mogul Elon Musk. In light of this, the suggestion of alternative growth stocks could provide investors with a more balanced and secure investment strategy.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote