Considering the strength of Nvidia’s (NVDA) fiscal fourth-quarter earnings report and subsequent commentary from the company, it’s disappointing the stock slipped this week. That was bad news for the Direxion Daily NVDA Bull 2X Shares (NVDU), which attempts to deliver 200% of the daily returns of the leading artificial intelligence (AI) chip stock. Nvidia reported 73% year-over-year revenue growth and is forecasting 77% year-over-year growth for the current quarter.
Perhaps it was a case of investors demanding too much from the often high-flying stock. Those expectations more than the results may have been why Nvidia and NVDU retreated this week. There may be some good news for risk-tolerant traders. The earnings report — an ideal occasion to consider an ETF like NVDU — is in the past. However, Nvidia’s fundamentals remain as impressive as ever. They indicate that there will be opportunities to tap the Direxion ETF over the near-term.
Dispelling AI Bubble Talk
Nvidia is the largest technology company and the largest U.S. firm by market value. That makes it vulnerable to fears about an AI bubble. Obviously, those concerns could really punish a geared ETF like NVDU. However, some experts believe the bubble chatter is overblown.
“We see no signs of slippage at Nvidia, as revenue growth is accelerating from recent quarters, thanks to the massive growth in artificial intelligence capital expenditure announced by large cloud computing companies. An ‘AI bubble’ does not appear imminent,” noted Morningstar’s Brian Colello.
As noted above, earnings reports can be the ideal events for traders making use of leveraged ETFs such as NVDU. Obviously, Nvidia has more reports in store this year. With bullish expectations in place, NVDU could have its moments in the sun. The prevailing wisdom indicates Nvidia’s forecasts may ultimately prove too restrained, particularly because those estimates don’t include any data center sales to China.
“Nvidia expects sequential growth in each of the four quarters of calendar 2026. Supported by a strong fiscal first-quarter outlook, management suggested that its prior guidance of $300 billion of Blackwell and Rubin product revenue in calendar 2026 will be conservative,” added Colello.
Speaking of data centers, commentary around that subject could be just what’s needed to boost shares of Nvidia and thus NVDU.
“In most quarters from calendar 2023 to 2025, Nvidia generally increased its data center revenue by about $4 billion, as new supply came online. We’re impressed that Nvidia’s fiscal first-quarter guidance implies $11 billion of incremental revenue sequentially,” concluded Colello.
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