Quick Read
-
Nvidia’s 4% year-to-date gain versus the semiconductor ETF’s 75% run makes it a rare value play at 22x forward earnings after a 16% pullback.
-
The upcoming Vera Rubin GPU cycle, promising 10x throughput-per-watt gains, gives Nvidia structural demand tailwinds.
-
Don’t wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now.
It’s been brutal to be a semiconductor investor lately, with the iShares Semiconductor ETF (NASDAQ:SOXX) tanking 11% in the past week and around 16% from all-time highs seen at the end of June. At this pace, it feels like a bear market is unavoidable, but before you hit the panic button, I’d argue that the latest correction is nothing all too out of the ordinary, especially when you consider the magnitude of the year-to-date run.
Despite the latest sell-off, the iShares Semiconductor ETF is still up over 75%. And while Dr. Michael Burry is looking very wise with his latest short positions against the group as well as individual bearish bets against Nvidia (NASDAQ:NVDA), I certainly wouldn’t want to single out Nvidia, especially as the GPU titan becomes one of the value plays of the batch. As to whether it will be (mostly) immune to the pain to come for the semiconductors remains the big question.
In my view, Nvidia didn’t really participate in the year-to-date boom, so it might not need to face as vicious a correction. With the shares holding their own on a turbulent Tuesday, gaining a fraction of a percent, perhaps Nvidia is the relative safety play as some of the hotter semiconductor names (think DRAM and NAND makers) come crashing back to Earth.
Don’t wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now.
With Nvidia stock up just 4% on the year, Jensen Huang’s empire is now trailing the market by quite a bit. But it’s this period of underperformance that I think makes the shares tempting to growth investors looking for relative value in an industry where some may think there’s no value to be had. So, rather than going short Nvidia and the broader basket of chip plays, I think it makes more sense to go long Nvidia and short the semis.
Shares just keep getting cheaper
With shares trading at 22.2 times forward price-to-earnings (P/E) and no signs that AI demand is slowing, ahead of what I believe could be a Vera Rubin boom (one of the timeliest catalysts of the year, in my books), value and growth investors alike might have something to love from the stock after a 16% drop from peak levels.