Bearish On Nvidia (NASDAQ: NVDA) Before Earnings? Check Out This Unique ETF - Alphabet (NASDAQ:GOOGL), Ad

21 Aug 2023

Nvidia Corporation NVDA appears to have emerged as a significant indicator of the broader AI sector. This technology company specializes in manufacturing GPUs, which are utilized by acclaimed AI technologies like ChatGPT for efficient functioning. Consequently, the market anticipates substantial profits from the burgeoning field, leading to a consistent upward trajectory of NVDA shares since late last year. Currently, these shares have surged by over 200% since the beginning of this year.

However, certain investors remain skeptical that the stock can maintain its current momentum in the long run – at least without facing some challenges along the way. For those individuals who perceive a potential bubble, these challenges could present profitable opportunities if approached tactfully. Presented below are a handful of reasons why certain traders hold a pessimistic outlook on NVDA.

Surges In Demand Outpace Nvidia's Production

Although the demand for Nvidia's GPUs remains unquestioned, speculations of an imminent shortage may unknowingly result in negative consequences for new AI research. The development of AI technology requires substantial investments of both time and money. The necessary hardware, extensive datasets, and expertise are all costly components needed to create AI that meets high expectations. Additionally, the time spent developing and training AI could have been utilized for research and development purposes if there was more certainty in the availability of resources.

Therefore, if developers cannot have a reasonable assurance that the graphics processing units (GPUs) they require will be accessible, certain companies may choose to delay their artificial intelligence (AI) endeavors until the availability of supply becomes more consistent.

Currently, NVDA's expansion holds significant potential for future earnings. Hence, the announcement that the semiconductor manufacturer could face challenges in increasing production adequately to meet the surging revenue projections might lead to a temporary decline in stock prices.

Opportunity For Rivals As Nvidia Chip Supply Dwindles

Nvidia appears to have a strong hold on the AI industry at the moment, but it is not the only player in the field. Advanced Micro Devices (AMD), Intel, Cerebras, and Alphabet are also prominent contenders to keep an eye on. In the event that Nvidia encounters difficulties in increasing its production to meet the overwhelming demand, it may create an opportunity for these competitors to establish themselves in the market.

AMD is working on a range of computer chips that will directly challenge Nvidia in terms of speed and efficiency. In addition to this, AMD provides an accessible software environment called ROCm, which allows developers to enter the field of AI development at a more affordable cost and with increased flexibility. Consequently, this may position AMD as a significant rival for smaller developers and startup businesses.

However, Intel is currently one of Nvidia's top rivals in chip-making, but it falls behind in terms of GPUs specifically designed for artificial intelligence. In 2019, Intel purchased Habana, obtaining their Gaudi AI chips. Although the Gaudi chips are not as speedy as Nvidia's newest GPUs, they are competitively priced and provide sufficient performance for less demanding AI duties. Additionally, Intel is developing Sapphire Rapids, a server CPU with integrated accelerators intended for managing generative AI processes.

Nvidia may currently enjoy an advantage as the sole prominent participant in this field, but as these rival items are introduced, it will become increasingly challenging for Nvidia to maintain its lead, particularly if it is already grappling with difficulties in expanding its manufacturing capacities.

Buy The AXS NVDA Bear Daily ETF For NVDA Dips

For individuals who have a negative outlook on Nvidia in the short term or wish to protect their current investment in the company, they might want to explore the option of utilizing the AXS 1.25x NVDA Bear Daily ETF (NVDS) as a temporary safeguard.

The NVDS is a leveraged exchange-traded fund (ETF) created by AXS Investments with the aim of achieving 125% of the opposite direction of NVDA's daily performance. This leverage can amplify the impact of each transaction, allowing even slight and brief downward movements to potentially result in significant profits for traders. Additionally, utilizing this ETF eliminates the need to borrow NVDA shares from your broker, which can sometimes be inconvenient.

Meanwhile, leveraged exchange-traded funds (ETFs) carry extra risk, and it is not advisable to hold them for an extended period. Thus, it is crucial for traders to conduct thorough research and grasp how to effectively include leveraged ETFs in their trading strategy. Nevertheless, if utilized prudently, NVDS could serve as a valuable asset for generating potential returns from a pessimistic view on Nvidia.

Photo credit: Caspar Camille Rubin on Unsplash.

This blog post includes content that is sponsored. The information provided is purely for informational purposes and should not be considered as financial advice.