Semiconductor stocks continue to rally and will continue to do so as long as the artificial intelligence (AI) and data center themes stay hot. So far, it appears that trend could persist for some time.
With the world getting more reliant on technology, processing power will be necessary to power applications such as AI and data centers. Per a CNBC report, consulting firm Bain published an "annual technology report":https://www.bain.com/insights/ai-changes-big-and-small-computing-tech-report-2024/ saying that companies will make “unprecedented levels of investment” in technological infrastructure as AI becomes a mainstay in corporate operations.
In today’s world, information is power and data centers will be necessary to house said information.
“If large data centers currently cost between $1 billion and $4 billion, costs for data centers five years from now could be between $10 billion and $25 billion,” Bain noted in the report, adding that data center operators as well as hardware suppliers will see an influx of capital investments from public and private entities to shore up computing capacity.
Of course, one of those names is Nvidia, which has been a darling for semiconductor investors this year. The stock is up over 150% this year, giving short-term traders plenty to cheer about if they rode the Nvidia rally from the beginning. As the Bain report mentioned, it will also see major investments from governments around the world.
“Nvidia, for example, projected $10 billion in revenue from governments’ sovereign AI investments in 2024, up from zero last year,” the report said.
Leveraged/Inverse Options
With the AI and data center trend continuing to gain momentum, semiconductors can also continue to see upside. That said, short-term traders may want to maximize their profit potential with leveraged ETFs like the Direxion Daily Semiconductor Bull 3X ETF (SOXL ). It seeks daily investment results equal to 300% of the daily performance of the PHLX Semiconductor Sector Index.
Alternatively, when semiconductors dip from profit-taking, market news, or other catalysts, there’s the Direxion Daily Semiconductor Bear 3X Shares (SOXS ). Traders can offset their bullish positions with SOXS, giving them flexibility irrespective of whether the semiconductor industry trends up or down.
Nvidia could also see more gains. As such, Direxion has a single-stock ETF solution for traders who want concentrated exposure to the AI chipmaker. Once again, traders can play both bullishness and bearishness with the Direxion Daily NVDA Bull 2X Shares (NVDU ) / Direxion Daily NVDA Bear 1X Shares (NVDD ) pair.
For more news, information, and analysis, visit the Leveraged & Inverse Channel.
