EXCLUSIVE: Nvidia's Sky-High Valuation 'Gives Some Investors Pause,' Expert Warns Of Reevaluation

Nvidia Corp NVDA has been a standout performer among semiconductor companies and the Magnificent Seven stocks.

However, can it maintain its leadership position through the second half of 2024?

Ed Egilinsky, Managing Director at Direxion, shares his insights, shedding light on the key drivers and potential headwinds for this tech titan.

Nvidia’s Sky-High Valuations Give Investors A Pause

“Nvidia has been a stalwart in the tech space over the last few years,” Egilinsky acknowledges. “However, its current valuation might make some investors pause. There is no denying Nvidia is a leader in the chip space and more specifically regarding AI-related chips. They should be a notable player in the space for years to come.”

But even champions need a breather. Post-stock split, Nvidia has underperformed both:

• The broader semiconductor index, as tracked by the VanEck Semiconductor ETF SMH and the iShares Semiconductor ETF SOXX, and
• the Nasdaq 100 index, as tracked by the Invesco QQQ Trust, Series 1 QQQ

Hence, Egilinsky believes the sky-high valuation might face reevaluation if competition intensifies or demand slows down.

Read Also: Nvidia Could Generate $12B In China With New AI Chips That Comply With US Restrictions: Report

Opportunities For Nvidia Bulls and Bears Alike

While Nvidia’s stock has trended mostly higher year-to-date, Egilinsky sees room for both bulls and bears. “For those active traders seeking to trade short-term price movements with Nvidia stock regardless of direction, Direxion offers tools to capitalize on these opportunities,” he notes.

Despite Nvidia's impressive performance, the stock market landscape remains dynamic. “Our leveraged ETFs are designed for active/short-term trading and should be monitored daily,” Egilinsky advises.

For traders looking at the bigger picture, the broader semiconductor space offers its own set of opportunities.

Egilinsky highlights that Direxion Daily Semiconductor Bull 3x Shares SOXL and Direxion Daily Semiconductor Bear 3x Shares SOXS ETFs cater to those wanting to take a stance on the entire sector.

“Our largest ETF currently is the SOXL ETF with more than $10 billion in assets. However, with the rally in semiconductors year-to-date, we have seen net inflows into 3X Bear semiconductor (SOXS) and outflows into our 3X Bull (SOXL),” said Egilinsky.

What's Next For Nvidia?

As Nvidia navigates H2 2024, the balance between its rich valuation and potential competition will be crucial. “There might be increasing competition and/or a demand slowdown leading to Nvidia's current rich valuation being reevaluated,” Egilinsky predicts.

For now, Nvidia remains a key player in the tech sector, but active traders will need to stay vigilant.

Read Next:

• Nvidia Absent At China’s AI Show, Chinese GPU Makers Step Up: Report