NVIDIA ETFs Seesaw Last Week: What's in Store?

Chip behemoth NVIDIA NVDA just witnessed a volatile week, initially reaching all-time highs and then meeting with a reversal. The stock was down 2.5% last week.

NVIDIA-heavy ETFs like Strive U.S. Semiconductor ETF SHOC, AXS Esoterica NextG Economy ETF WUGI, Grizzle Growth ETF DARP and VanEck Vectors Semiconductor ETF SMH were off 0.3%, up 0.03%, down 0.8% and down 0.2%, respectively, last week.

Despite this, Bank of America maintains a Buy rating with a $150 price target, emphasizing NVIDIA as a "top pick" as quoted on Yahoo Finance. NVIDIA briefly topped Microsoft MSFT as the world's most valuable company last week, yet closed out with a market cap of about $3.12 trillion, slightly below Microsoft's $3.33 trillion.

Some analysts warn of a likely profit-taking but remain optimistic about NVIDIA's long-term prospects. The AI enthusiasm, by now, could create a bubble. This is especially true given the research done by venture capital firm Sequoia which indicated that the industries shelled out $50 billion on chips from NVIDIA to train AI in 2023 but reaped in only $3 billion in revenues, as quoted on Mint.

NVIDIA's Fate Related to Ecosystem Partners?

Patrick Moorhead from Moor Insights & Strategy told Yahoo Finance recently that investors should remain vigilant of a potential pullback in NVIDIA. However, he doesn't expect the chip giant's leadership on Wall Street to fade anytime soon, at least in the next six to nine months.

He highlighted the importance of downstream profitability for NVIDIA's ecosystem partners, such as Adobe ADBE, Salesforce CRM, SAP SAP and ServiceNow NOW. He cautioned that failure to monetize new AI features by these software firms could hurt NVIDIA's growth trajectory, like what happened during the dot.com bubble bust in 2000.

Inside NVIDIA's Downstream Partners' Performance

Adobe's Zacks earnings estimate for 2024 has gone up from $17.98 to $18.14 over the past seven days. Adobe shares have rallied 10.2% past month.

Salesforce's Zacks Consensus Estimate for earnings for the full year has increased from $9.71 to $9.89 over the past month, although the estimate remained the same over the past week. CRM stock is down 13.7% past month but has surged 7.4% past week.

SAP's Zacks Consensus Estimate for earnings for 2024 did not budge over the past month or week. SAP has lost its winning momentum lately, as it has remained flat over the past month despite gaining 30% in the year-to-date frame.

Like SAP, ServiceNow's consensus earnings estimate too remained the same over the last 30-day period. NOW shares are up a modest 9% this year, down 2.8% past month and up 4.7% past week.

Overall, any positive sales signals from the downstream players would make the case for NVIDIA investing even stronger.

$4-Trillion Marlet Cap Likely for NVIDIA

Despite its havoc stock performance — up 195% in the last year and over 3,200% in the last five years—analysts like Moorhead believe NVIDIA could touch a $4 trillion market cap. This optimism lies in continued AI investment and data center spending and NVIDIA's huge 80% market share in AI chips for data centers.

After all, fundamentals are still in place for NVIDIA, and the stock may rebound from its current levels. Wedbush analyst Dan Ives believes that the revolution in the AI space has just started. He expects incremental AI spending to hit $1 trillion over the next decade, with more than 70% of enterprises eventually resorting to AI usage, as quoted on Yahoo Finance.

Price Target

Based on short-term price targets offered by 41 analysts, the average price target for NVIDIA comes to $124.79. The forecasts range from a low of $69.00 to a high of $150.00. NVIDIA's last closing price was $126.57.

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