NVIDIA Corp. NVDA and Advanced Micro Devices, Inc. AMD – both titans in artificial intelligence – witnessed notable market value upticks midweek. NVDA soared over 8% from Tuesday’s close, while AMD trailed closely at nearly 5%.
A recent Reuters article highlighted potential U.S. government contemplation on allowing Nvidia to export its advanced graphics processors to Saudi Arabia. Such a move would signify a shift from the Biden administration’s restrictions on these chips, aimed at counteracting China’s digital aspirations.
If the shipment gets cleared, it could offer a vital boost to NVDA and similar players. Despite their strong performance over the past year, both Nvidia and Advanced Micro have hit a slow patch in recent months.
Another positive note emerged on Wednesday with reports suggesting that OpenAI, the parent company of ChatGPT, might pursue a $6.5 billion equity financing round. Prospective investors include Nvidia, tech behemoths Microsoft Corp, and Apple Inc. The rising popularity of large language models could bode well for NVDA stock with potential OpenAI growth.
However, not all analysts share an optimistic outlook on the sustainability of this innovation trend. While certain industry leaders gain substantial ground, companies focusing beyond AI, like traditional software firms, encounter hurdles.
Firms like workflow management company Asana Inc., leveraging AI and big data, faced challenges of excessive hiring and spending at the pandemic’s onset. Now, the market adjusts to current conditions, putting high valuations of some businesses at risk.
The ETFs:
Despite the mixed sentiments, financial services firm Direxion presents an enticing environment for traders to engage with the trend through leveraged and inverse exchange-traded funds. Traders bullish on artificial intelligence might eye the Direxion Daily AI and Big Data Bull 2X Shares (AIBU).
Contrarily, skeptics of AI and inflated tech valuations could consider the Direxion Daily AI and Big Data Bear 2X Shares (AIBD) for their portfolio. Both ETFs mirror the daily investment outcomes – doubling in the case of AIBU and presenting the inverse 200% in AIBD – of the Solactive US AI & Big Data Index.
Investors exploring AIBU or AIBD should note these funds’ one-day exposure design. Due to daily volatility compounding, extended holdings of leveraged funds may deviate significantly from anticipated performances.
The AIBU ETF:
While the AI and Big Data fund commenced the year on a strong note, the latter half encountered increased resistance.
- AIBU recently faced challenges but managed to reverse its earlier slump, yet it hits a barrier around $27, akin to the hurdles affecting NVDA shares.
- Even if AIBU surpasses the $27 threshold, it must overcome the sub-$29 level. Moreover, past encounters around the $28 mark suggest substantial barriers ahead.
The AIBD ETF:
Conversely, AIBD faced struggles in the first half of 2024 but appears to stabilize in the latter half.
- Though Wednesday wasn’t kind to AIBD, it clings to a robust support at $22.
- An increase in volume, relatively, entered the inverse ETF recently, indicating mounting interest in betting against the prevalent AI theme.
Featured photo by Brian Penny on Pixabay.
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