Nvidia's Stock Split Could Spell Upside For Spear Alpha ETF's (SPRX) Top Holding

Author: Benzinga Newsdesk | June 11, 2024 08:32am

NVIDIA Corporation (NASDAQ:NVDA) began trading on a 10-for-1 split-adjusted basis on Monday, potentially opening the door for more retail investors to jump aboard the semiconductor powerhouse. The company is best known for developing advanced graphics processing units (GPUs) that power the most innovative AI-based protocols and platforms.

Last month, Nvidia delivered blistering results yet again in its financial disclosures. In its first quarter of fiscal year 2025, the tech giant posted earnings per share of $6.12 on revenue of $26.04 billion. In contrast, analysts were anticipating EPS of $5.60 on sales of $24.59 billion.

However, the resounding success of the tech stalwart had a consequence. With NVDA stock trading above $1,200 prior to its split, it became inaccessible to retail investors who lacked access to fractional share ownership capabilities. By initiating the split, Nvidia has become more accessible to everyday market participants, potentially sparking the impetus for additional growth.

Interested in NVDA Stock? Obviously, those who are bullish on Nvidia's prospects can always acquire its shares outright. However, the tech space can be volatile, with unexpected surprises from both internal and external sources presenting risk factors. To mitigate some of this unpredictability, investors may choose to consider a position in the Spear Alpha ETF (NASDAQ:SPRX).

An actively managed fund, Spear Alpha benefits from the expertise of its fund management team, helping investors navigate the often wild ebb and flow of the tech ecosystem. Currently, Spear Alpha's top holding is NVDA stock, with a fund weighting of 12.88%. Coming in second place is cloud infrastructure specialist Zscaler (NASDAQ:ZS) with a weighting of 9.67%, followed by Advanced Micro Devices (NASDAQ:AMD) at 9.30%.

Another benefit of considering SPRX is the focus on emerging trends in industry technology. Several of the ETF's individual holdings encompass the specialties of enterprise digitalization, automation, AI, environmental stewardship, photonics, additive manufacturing and space exploration.

Look to Sector Performance, Not History: Although it's tempting to look back at Nvidia's prior stock splits to better determine the forward trajectory of NVDA stock, this exercise might not be as helpful as it may initially seem. That's because Nvidia, in the past, depended heavily on the video-gaming sector.

Undoubtedly, the gaming industry is massive. According to Statista, the sector expanded from total revenue of $7.98 billion in 2000 to $19.7 billion in 2009, translating to a compound annual growth rate (CAGR) of 10.56%. Grand View Research further expects the market to grow at a CAGR of 13.4% over 2023-2030. However, the AI sector appears to be in a different league.

Per Grand View Research, the AI ecosystem could generate revenue of $279.22 billion by the end of this year. By 2030, the industry could generate sales of over $1.81 trillion, implying a CAGR of 36.6%. That's really the mainline narrative that undergirds NVDA stock.

The Nvidia Chart: Overall, the technical picture of Nvidia stock is resolutely bullish. Since the beginning of the year, the security has gained just under 153%. Over the past 52 weeks, the performance metric has jumped to more than 208%. Still, there are some nuances to consider.

Following the close of the May 22 session (when Nvidia disclosed its blockbuster Q1 earnings report), NVDA stock predictably gapped up to start the next session. This move was met by a pronounced spike in acquisition volume.
As Nvidia stock began marching higher to its present post-split-adjusted price of $121.65 per share, the acceleration of the price action conspicuously faded. At the same time, acquisition volume declined, implying the beginning of a consolidation phase.
Optimistic investors shouldn't necessarily be worried about the consolidation in the absence of an overtly bearish signal. It's not unusual for high-flying securities to enter a sideways trading range following a big move higher.
Indeed, the three-phase pattern of spike-consolidation-spike is one of the key tenets of technical analysis, forming the foundation for commonly cited chart patterns such as the bullish flag or bullish pennant.