Nvidia Likely to Beat on Q4 Earnings: 5 ETFs to Tap

Investors' favorite Nvidia NVDA is set to release its fourth-quarter fiscal 2024 results on Feb 21, after market close. The world's most valuable semiconductor company has been on the hottest winning streak, fueled by the artificial intelligence AI frenzy and analysts' bullish view. After the biggest monthly increase ever in market value in January, Nvidia overtook Amazon AMZN at $1.78 trillion and became the fourth-most valuable company in the United States (read: Nvidia Overtakes Amazon in Market Value: ETFs to Tap).

The outperformance is expected to continue, given higher chances of an earnings beat and positive earnings revisions. Given this, ETFs having the largest allocation to Nvidia could make compelling plays ahead of its earnings report. These include VanEck Vectors Semiconductor ETF SMH, AXS Esoterica NextG Economy ETF WUGI, Global X Robotics & Artificial Intelligence ETF BOTZ, MeetKevin Pricing Power ETF PP and Pacer Data and Digital Revolution ETF TRFK.

Earnings Whispers

Nvidia currently has a Zacks Rank #2 (Buy) and an Earnings ESP of +3.67%. According to our methodology, the combination of a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 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 largest chipmaker saw a positive earnings estimate revision of 3 cents over the past seven days for the fourth quarter of fiscal 2024. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Nvidia is expected to post massive earnings and revenue growth of 415.9% and 234%, respectively, for the to-be-reported quarter. Nvidia's earnings surprise history is good, as it delivered an earnings surprise of 18.99%, on average, in the last four quarters.

Nvidia currently has an average brokerage recommendation ABR of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 40 brokerage firms. The current ABR compares to an ABR of 1.23 a month ago based on 37 recommendations.

Of the 40 recommendations deriving the current ABR, 35 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 87.5% and 5% of all recommendations. A month ago, Strong Buy made up 83.78%, while Buy represented 8.11%.

Based on short-term price targets offered by 37 analysts, the average price target for Nvidia comes to $694.44. The forecasts range from a low of $410.00 to a high of $1,100.00.

What's Hot?

Most of the analysts raised the price target on Nvidia ahead of its quarterly earnings release. Morgan Stanley raised its price target to $750, while Goldman and Bank of America hiked the price target to $800. Meanwhile, Melius Research boosted the price target for Nvidia even higher to $920 from $750.

A key factor driving the surge is Nvidia's dominant position in the AI sector. The world's largest chipmaker continues to benefit from the explosive demand for its cutting-edge chips used in AI applications, which are used to power ChatGPT and many similar services. It 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 fourth quarter of fiscal 2024, the graphics chipmaker expects revenues of around $20 billion, plus or minus 2%. However, new restrictions on chip exports to China implemented by the Biden administration would weigh on results. The chip designer expects a steep drop in fourth-quarter sales in China — a key revenue generator — in the wake of new U.S. rules.

ETFs to Tap

Let's delve into each ETF below:

VanEck Vectors Semiconductor ETF SMH

VanEck Vectors Semiconductor ETF offers exposure to companies involved in semiconductor production and equipment. It 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 24.7%.  

VanEck Vectors Semiconductor ETF has managed assets worth $14.8 billion and charges 35 bps in annual fees and expenses. 

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 33 stocks in the basket, with Nvidia occupying the top position at 24.1%.

AXS Esoterica NextG Economy ETF has accumulated $29.6 million in its asset base and charges 75 bps in fees per year.

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 in industrial robotics and automation, non-industrial robots and autonomous vehicles.

Global X Robotics & Artificial Intelligence ETF has 42 stocks in its basket, with Nvidia occupying the top spot with a 19.9% share. The ETF has AUM of $2.5 billion and charges 69 bps in annual fees.

MeetKevin Pricing Power ETF (PP)

MeetKevin Pricing Power ETF is an actively managed ETF that seeks to achieve its investment objective by investing primarily in U.S.-listed equity securities of Innovative Companies, which, in Kevin's view, have more "pricing power" than their peers. The fund holds a small basket of 16 stocks, with Nvidia occupying the top position at 18.5%.

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 79 stocks in its basket. Out of these, Nvidia is the top firm, accounting for a 10.2% share.

Pacer Data and Digital Revolution ETF has accumulated $21.1 million in its asset base. It has an expense ratio of 0.60%.

To read this article on Zacks.com click here.

Zacks Investment Research