Warning issues over Nvidia share investment
In a recent report by financial portal TipRanks, Vladimir Dimitrov, a certified CFA and top Wall Street financial blogger, has raised concerns about Nvidia's stock following its addition to the Dow Jones Industrial Index (DJIA). This move marks a significant milestone for Nvidia, signifying its growing influence in the market, but it has also sparked discussions about the potential impact of the "Dow Curse."
The Dow Curse is a historical trend where stocks added to the DJIA tend to underperform after their inclusion. This pattern is more of a market superstition or pattern noted by investors rather than a guaranteed outcome. Stocks added to the prestigious index often see a short-term price spike due to increased demand from funds tracking the DJIA, but subsequently, some of these stocks have underperformed, leading to the notion of a "curse."
Nvidia's addition to the DJIA could expose the stock to this pattern of underperformance. While being included in the DJIA is a mark of prestige, it also means Nvidia shares will be bought by index funds replicating the DJIA, potentially inflating its price temporarily. After this initial boost, there is a risk that Nvidia's stock could face selling pressure or fail to sustain gains, reflecting the Dow Curse pattern.
Despite these concerns, it's important to note that Nvidia has been performing exceptionally well in recent times. As of now, Nvidia's stock has seen a year-to-date increase of around 200%, similar to the surge it experienced last year. The company's new chip series, "Blackwell," is in high demand and sold out for the next 12 months. CEO Jensen Huang stated that the "Blackwell" chip series is a major growth driver for the future.
Moreover, Nvidia's stock reached an all-time high last week and surpassed Apple in market capitalization. The expert does not advise selling Nvidia stock but rates it as a hold, acknowledging the company's strong performance this year. However, the expert believes the market's expectations for Nvidia's current growth rate are a low-probability scenario.
In conclusion, while Nvidia's addition to the DJIA is a cause for celebration, it also brings the potential risk of the Dow Curse. Investors are advised to closely monitor this development and manage potential risks accordingly. Nvidia's strong performance this year and its strategic growth initiatives suggest that the company is well-positioned to navigate any potential challenges that may arise.
Investors should be aware of the potential impact of the Dow Curse on Nvidia's stock, as its inclusion in the Dow Jones Industrial Index (DJIA) could lead to a pattern of underperformance. Despite the risk, Nvidia's exceptional performance this year, surging market capitalization, and strong growth initiatives indicate that the company is well-positioned to weather any potential challenges and maintain its position in the stock-market and the finance world.
