Home etftrends.com Can Nvidia Continue to Lead the Charge in AI?

Can Nvidia Continue to Lead the Charge in AI?

Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. An investor could lose the full principal value of his or her investment in a single day. Investing in the Funds is not equivalent to investing directly in NVDA.

Important Notice to Investors: Effective April 2, 2024, Direxion will increase exposure and risk from 1.5X to 2X on Single Stock Daily Leveraged Bull ETFs. Read the Press Release.

Off the back of fresh earnings that exceeded expectations, shares of NVIDIA Corporation (Ticker: NVDA) continued their bull run and broke out to new all-time highs. The company continues to spearhead innovation in the artificial intelligence (AI) space with its computer chips – but can the historic rally persist, or will bears finally have their moment?

Will Nvidia Emerge as the True AI Champion?

While Nvidia manufactures some of the most important chips for the AI revolution, the company isn’t stopping there, as the share price continues to ride on the coattails of the market’s AI craze.

A report recently revealed that Nvidia has taken a stake in SoundHound AI, a leader in voice recognition technology. The company’s software is already being used by brands like White Castle, Krispy Kreme, and Jersey Mike’s to assist in food orders. According to Nasdaq.com, SoundHound AI already has over 260 patents in the tech space.

Traders that think Nvidia’s investment in SoundHound AI could be a catalyst for additional growth that could drive earnings even higher may be interested in Direxion’s Daily NVDA Bull 1.5X Shares (Ticker: NVDU), which seeks daily investment results, before fees and expenses, of 150% of the performance of NVIDIA Corporation common stock.

Below is a daily chart of NVDA as of February 29, 2024.

Source: TradingView.com

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results.

The slanted blue line represents an uptrend. An uptrend describes the price movement of a financial asset when the overall direction is upward

Could a Recession Pull the Plug on the AI Boom?

Just recently, there was a slight downward Q4 2023 gross domestic product* revision from 3.3% to 3.2%. At the moment, an economic slowdown may be one of the biggest risks for the AI boom, as it would likely coincide with a correction in stock prices.

Despite the prospects for more liquidity on the horizon due to the Fed potentially cutting rates this year, traders must also recognize that this can mean a slowdown in economic growth. The Fed’s next meeting is on March 20. Currently, there aren’t any expectations for a rate cut, but if the central bank surprises markets and pivots prematurely, it could be interpreted as a panic signal on behalf of the central bank, which could lead to a broader market turndown.

Traders that think recession risks could weigh on Nvidia in the near-term may find an opportunity with Direxion’s Daily NVDA Bear 1X Shares (Ticker: NVDD), which seeks daily investment results, before fees and expenses, of the inverse (or opposite) of the performance of NVIDIA Corporation common stock.

More Individual Stock and Sector Plays

Direxion offers additional single stock ETFs for speculators looking to take concentrated bets in the market. These innovative funds provide traders an opportunity to take on leverage or inverse exposure to stocks like Microsoft, Apple, Google, and Amazon.

The Direxion Daily MSFT Bull 1.5X Shares (Ticker: MSFU) seeks daily investment results, before fees and expenses, of 150% of the performance of Microsoft Corporation common stock, while the Direxion Daily MSFT Bear 1X Shares (Ticker: MSFD) seeks daily investment results, before fees and expenses, of the inverse (or opposite) of the performance of Microsoft Corporation common stock.

The Direxion Daily AAPL Bull 1.5X Shares (Ticker: AAPU) seeks daily investment results, before fees and expenses, of 150% of the performance of Apple Inc. common stock, while the Direxion Daily AAPL Bear 1X Shares (Ticker: AAPD) seeks daily investment results, before fees and expenses, of the inverse (or opposite) of the performance of Apple Inc. common stock.

The Direxion Daily GOOGL Bull 1.5X Shares (Ticker: GGLL) seeks daily investment results, before fees and expenses, of 150% of the performance of Alphabet Inc. class A shares, while the Direxion Daily GOOGL Bear 1X Shares (Ticker: GGLS) seeks daily investment results, before fees and expenses, of the inverse (or opposite) of the performance of Alphabet Inc. class A shares.

The Direxion Daily AMZN Bull 1.5X Shares (Ticker: AMZU) seeks daily investment results, before fees and expenses, of 150% of the performance of Amazon.com, Inc. common stock, while the Direxion Daily AMZN Bear 1X Shares (Ticker: AMZD) seeks daily investment results, before fees and expenses, of the inverse (or opposite) of the performance of Amazon.com, Inc. common stock.

Traders looking for a sector-wide approach may be interested in Direxion’s Daily Technology Bull 3X Shares (Ticker: TECL) and Daily Technology Bear 3X Shares (Ticker: TECS), which seek daily investment results, before fees and expenses, of 300%, or -300%, respectively, of the performance of the Technology Select Sector Index*, or even the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 2X Shares (Ticker: UBOT), which seeks daily investment results, before fees and expenses, of 200% of the performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index*.

*Definitions and Index Descriptions

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

The Technology Select Sector Index (IXTTR) is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector which includes the following industries: computers and peripherals; software; diversified telecommunications services; communications equipment; semiconductors and semi-conductor equipment; internet software and services; IT services; electronic equipment, instruments and components; wireless telecommunication services; and office electronics.

The Indxx Global Robotics and Artificial Intelligence Thematic Index (IBOTZNT) is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence, including companies involved in developing industrial robots and production systems, automated inventory management, unmanned vehicles, voice/image/text recognition, and medical robots or robotic instruments, as defined by the index provider, Indxx. Companies must have a minimum market capitalization of $100 million and a minimum average daily turnover for the last 6 months greater than, or equal to, $2 million in order to be eligible for inclusion in the Index.

The Funds have derived all disclosures contained in this document regarding NVIDIA Corporation from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding NVIDIA Corporation is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of NVIDIA Corporation have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning NVIDIA Corporation could affect the value of a Fund’s investments with respect to NVIDIA Corporation and therefore the value of the Funds.

Semiconductor Industry Risk – Semiconductor companies may face intense competition, both domestically and internationally, and such competition may have an adverse effect on such companies’ profit margins. Semiconductor companies may have limited product lines, markets, financial resources or personnel. Companies in the semiconductor industry may have products that face obsolescence due to rapid technological developments and frequent new product introduction, unpredictable changes in growth rates and competition for qualified personnel.

NVIDIA Corporation Investing Risk — NVIDIA Corporation faces risks associated with meeting the evolving needs of its large markets – gaming, data center, professional visualization and automotive – and identifying new products, services and technologies; competition in its current and target markets; changes in customer demand; supply chain issues; manufacturing delays; potential significant mismatches between supply and demand giving rise to product shortages or excessive inventory; the dependence on third-parties and their technology to manufacture, assemble, test, package or design its products which reduces control over product quantity and quality, manufacturing yields, development, enhancement and product delivery schedules; significant product defects; international operations, including adverse economic conditions; impacts from climate change, including water and energy availability; business investment and acquisitions; system security and data protection breaches, including cyberattacks; business disruptions; a limited number of customers; the ability to attract, retain and motivate executives and key employees; the proper function of its business processes and information systems; impacts from the COVID-19 pandemic; its intellectual property; and other regulatory, and legal issues.

Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning. Risks of the Funds include Effects of Compounding and Market Volatility Risk, Leverage Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Daily Correlation Risk, NVIDIA Corporation Investing Risk, Market Risk, Industry Concentration Risk, Cash Transaction Risk, Tax Risk, Indirect Investment Risk, Trading Halt Risk, and risks specific to the technology sector and semiconductor industry. Additional risks include, for the Direxion Daily NVDA Bear 1X Shares, risks related to Shorting. Please see the summary and full prospectuses for a more complete description of these and other risks of the Funds.

Distributor: Foreside Fund Services, LLC.

Originally published 14 March, 2024

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