Nvidia Leads the Magnificent Seven Stocks in 2023

Nvidia (NVDA) is one of the four stocks that made it to the list of the Magnificent Seven stocks in 2023, according to Investor’s Business Daily (IBD). The other three are Tesla (TSLA), Shopify (SHOP), and Roku (ROKU). These stocks have shown exceptional performance and growth potential in the past year, despite the challenges posed by the Covid-19 pandemic and the global chip shortage.

The Magnificent Seven stocks are a group of stocks that have met the following criteria, as defined by IBD:

  • They have a market capitalization of at least $10 billion.
  • They have an average daily volume of at least 500,000 shares.
  • They have a Composite Rating of 95 or higher, which combines five key fundamental and technical factors into one score.
Nvidia Leads the Magnificent Seven Stocks in 2023
Nvidia Leads the Magnificent Seven Stocks in 2023
  • They have an EPS Rating of 80 or higher, which measures earnings growth and quality.
  • They have an RS Rating of 85 or higher, which measures relative price performance.
  • They have a SMR Rating of A or B, which measures sales growth, profit margins, and return on equity.
  • They have an Accumulation/Distribution Rating of A or B, which measures institutional buying and selling activity.

Out of the thousands of stocks that trade on the U.S. exchanges, only seven stocks met these criteria as of Dec. 29, 2023. These are the Magnificent Seven stocks, and they represent some of the best opportunities for investors in the stock market.

Why Nvidia Stock Stands Out

Among the Magnificent Seven stocks, Nvidia stock is the most impressive, as it has the highest Composite Rating of 99, the highest EPS Rating of 96, and the highest RS Rating of 99. Nvidia also has a SMR Rating of A and an Accumulation/Distribution Rating of B.

Nvidia is the leader in the graphics processing unit (GPU) market, which is used for gaming, artificial intelligence, cloud computing, and cryptocurrency mining. Nvidia also has a strong presence in the data center, automotive, and professional visualization markets. Nvidia has been benefiting from the surging demand for its products and services, as well as its innovative product launches and strategic partnerships.

Nvidia stock has soared more than 240% in 2023, reaching an all-time high of $505.48 on Dec. 28. Nvidia stock has also outperformed its peers in the semiconductor industry, such as Intel (INTC), AMD (AMD), and Qualcomm (QCOM). Nvidia has a market capitalization of $1.22 trillion, making it the seventh-largest U.S. company by market value.

What are the Challenges and Opportunities for Nvidia Stock?

Nvidia stock is not without challenges, however. The global chip shortage, which has affected many industries and sectors, could limit Nvidia’s production and sales in the near term. Nvidia also faces regulatory hurdles for its proposed acquisition of Arm, the British chip designer, which could boost its competitive edge in the mobile and IoT markets. Nvidia also faces competition from other players in the GPU and AI markets, such as AMD, Google (GOOGL), and Amazon (AMZN).

Despite these challenges, Nvidia stock has many opportunities for growth and expansion in the future. Nvidia is expected to launch its next-generation GPU architecture, codenamed Lovelace, in 2024, which could offer significant performance improvements over its current Ampere architecture. Nvidia is also investing in new technologies and markets, such as ray tracing, virtual reality, autonomous driving, and metaverse. Nvidia is also expanding its presence in China, the world’s largest gaming market, through partnerships with local companies and platforms.

Nvidia is also rewarding its shareholders with dividends and buybacks. Nvidia has a quarterly dividend of $0.16 per share, which translates to a yield of 0.03%. Nvidia also announced a $100 billion share repurchase program in November, which could boost its earnings per share and stock price.

How to Invest in Nvidia Stock and the Magnificent Seven Stocks?

Nvidia stock and the other Magnificent Seven stocks are not cheap, as they trade at high valuations compared to their earnings and sales. Nvidia stock has a price-to-earnings ratio of 65.14 and a price-to-sales ratio of 25.76, which are above the industry averages of 34.88 and 7.64, respectively. The other Magnificent Seven stocks also have high P/E and P/S ratios, ranging from 40.66 to 1,026.67 and from 9.83 to 38.77, respectively.

However, these high valuations reflect the high growth potential and competitive advantage of these stocks, which could justify their premium prices. Investors who are interested in these stocks should look for buying opportunities when they are trading near their support levels, such as their 10-day, 21-day, or 50-day moving averages. Investors should also use proper risk management techniques, such as setting stop-loss orders and position sizing, to protect their capital and profits.

Alternatively, investors who want to diversify their portfolio and reduce their risk can invest in exchange-traded funds (ETFs) that hold these stocks. Some of the ETFs that have exposure to the Magnificent Seven stocks are:

  • Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100 index and has Nvidia, Tesla, and Roku as its top holdings.
  • ARK Innovation ETF (ARKK), which invests in companies that are disrupting their industries with innovation and has Tesla, Roku, and Shopify as its top holdings.
  • VanEck Vectors Semiconductor ETF (SMH), which focuses on the semiconductor industry and has Nvidia and Intel as its top holdings.
  • Global X E-commerce ETF (EBIZ), which targets the e-commerce sector and has Shopify as its top holding.

These ETFs offer exposure to the Magnificent Seven stocks, as well as other leading companies in their respective fields, and could offer attractive returns for investors in the long term.

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