Nvidia (NVDA - Free Report) shares are on a tear this year, having gained about 75% (as of Sep 18, 2017). But the latest jump came on the back of “a hyper-bullish report from Evercore ISI senior equity research analyst C.J. Muse.” Shares added more than 4% on Sep 18.
Muse's report on Friday morning pushed up the semiconductor company’s price target from $180 to $250, breezing past Wall Street's previously highest target of $200, as quoted on CNBC. The analyst noted that “we are only at the cusp of AI's growth potential and NVIDIA is creating THE AI computing industry standard."
Another analyst believes that Nvidia “looks [a] lot like Intel (INTC - Free Report) did back in the early 1990s before a multiyear rally that took that stock up some 17-fold.”
Nvidia, which designs, develops and markets a top-to-bottom family of award-winning 3D graphics processors, graphics processing units and related software, is hugely benefiting from a cryptocurrency rally.
Bitcoin is on fire this year. These are ‘mined’ by using a greater amount of computer processing power. Creation and transactions in bitcoin are controlled through cryptography to keep transactions secure (read: Bitcoin Skyrockets, Race to First Cryptocurrency ETF Heats Up).
Like bitcoin, Ether or etherum is also quite popular this year. Now, mining of cryptocurrencies needs the usage of semiconductors. A hardware known as an ASIC (Application-Specific Integrated Circuit) is designed explicitly for mining bitcoin.
This where semiconductor companies can gain traction. As per Bloomberg, there was a 10-fold rise from April to June in the Ethereum market which helped shares of Nvidia and Advanced Micro Devices Inc. (AMD - Free Report) substantially (read: Should You Buy These Semiconductor ETFs & Stocks Now).
Inside Stock Strength
The earnings projection for the upcoming quarter was upped to 94 cents per share from 78 cents in the last 60 days. Seven out of eight analysts raised estimates while none did the opposite.
Nvidia has a Zacks Rank #1 (Strong Buy) with a Growth Score of C. The Zacks Industry Rank and Zacks Sector Rank are in the top 1% and top 31%, respectively.
ETFs to Buy
Given the bullishness, investors should definitely ride the surge in a basket form. Below are five ETFs with the highest allocation to this graphics chipmaker that could make a compelling play at least in the near term (see all Total Market (U.S.) ETFs).
iShares PHLX Semiconductor ETF (SOXX - Free Report)
This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 U.S. firms. Out of these, NVDA takes the top spot with 8.24% allocation. The fund has amassed $1.2 billion in its asset base. It charges a fee of 48 bps a year. The fund has a Zacks Rank of 1 or ‘Strong Buy’ rating with a High risk outlook.
ARK Industrial Innovation ETF (ARKQ - Free Report)
This is an actively managed ETF seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvement and advancements in scientific research related to robotics, energy storage, innovative materials, alternative energy sources, infrastructure development, space exploration, autonomous vehicles and 3D printing. NVIDIA occupying the third position with 7.3% share. The product has accumulated $73.2 million in its asset base and charges 75 bps in fees per year (read: 6 Hot ETF Charts of Q1 Earnings Season).
VanEck Vectors Semiconductor ETF (SMH - Free Report)
This is one of the popular and liquid ETFs in the semiconductor space with AUM of $908.7 million. The fund provides exposure to 26 global securities by tracking the MVIS US Listed Semiconductor 25 Index. NVIDIA occupies the third position with 6.2% of assets. While U.S. firms dominate the fund’s holdings with 76.1% assets, Taiwan (12.4%), the Netherlands (9.9%) and Bermuda (1.6%) round off the top four in terms of country exposure. The fund charges an expense ratio of 0.36%. It has a Zacks Rank of 1 with a High-risk outlook.
PowerShares Dynamic Semiconductors Fund (PSI - Free Report)
This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in the basket. NVIDIA occupies the second position and makes up for 5.1% share in the basket. PSI has lower AUM of $291 million. It charges higher 63 bps in annual fees and has a Zacks Rank of 1 with a High risk outlook.
Huntington EcoLogical Strategy ETF (HECO - Free Report)
This is an actively managed ETF that offers exposure to ecologically focused companies. It holds 43 stocks in its basket with NVIDIA taking the top spot at 5.48% of assets. Expense ratio comes in at 0.95%. The fund has AUM of $8.4 million.
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