Still bullish on Nvidia but want to hedge your bets?

Still bullish on Nvidia but want to hedge your bets?

  • 24.03.2025 00:00
  • fool.com.au
  • Keywords: Market Volatility, Competition

Nvidia has seen massive growth but faces challenges like declining revenue and competition, prompting some investors to hedge. ASX ETFs offer diversified exposure to Nvidia and the broader tech sector, providing a balanced approach amid market uncertainties.

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Estimated market influence

Nvidia

Nvidia

Positivesentiment_satisfied
Analyst rating: Strong buy

Nvidia's stock has dropped but still seen as a success story with future growth potential.

DeepSeek

Negativesentiment_dissatisfied
Analyst rating: N/A

Competition from DeepSeek has caused investor concerns.

Context

Analysis of Nvidia's Market Position and Business Insights

Overview

  • Nvidia's Growth: Nvidia has experienced exceptional growth over the past five years, with its stock price increasing by more than 2,000%.
  • Recent Share Price Drop: Despite this success, Nvidia's share price fell approximately 20% from its peak.

Financial Performance and Market Concerns

  • Data Center Revenue:

    • Q3 data center revenue dropped by 1.6% year-over-year to $73 billion.
    • Management attributed the decline to the ramp-up of its latest GPU, Blackwell.
    • The market remained skeptical, causing the stock to slide by 8% in the following trading session.

  • Market Sentiment:

    • Investors are questioning whether Nvidia has reached its peak, given its current valuation of around $3 trillion (briefly surpassing Apple as the world's most valuable company).

Competitive Landscape

  • Rising Competition:
    • The AI sector is seeing increased competition, notably with DeepSeek, a Chinese AI model that surprised the market earlier in the year.
    • This has raised concerns among investors about Nvidia's dominance.

Strategic Considerations and Investment Options

ASX ETFs for Exposure to Nvidia

  1. BetaShares Nasdaq 100 ETF

    • Nvidia Weight: 8.0% of the fund.
    • Management Fee: 0.48%.
    • Performance: Up more than 100% over five years.

  2. Global X US 100 ETF

    • Nvidia Weight: 8.9% of the fund.
    • Management Fee: 0.18%.
    • Note: Launched less than a year ago, with no long-term track record yet.

  3. Global X Semiconductor ETF

    • Nvidia Weight: 9.1% of the fund.
    • Other Holdings: ASML Holding NV and Taiwan Semiconductor Manufacturing Co Ltd.
    • Performance: Up more than 60% over five years.

Long-Term Implications and Industry Trends

  • AI Growth Potential: The AI industry is projected to grow at a compound annual growth rate (CAGR) of 35.9% until 2030, creating opportunities beyond Nvidia alone.
  • Diversification Strategy: Investors are advised to consider diversified ETFs rather than relying solely on Nvidia, given the risks and uncertainties in the market.

Key Takeaways

  • While Nvidia's future growth is promising, its current valuation and competition pose significant risks.
  • Diversification through ETFs may offer a more balanced approach for investors looking to capitalize on AI's long-term potential.