| Ticker | Status | Jurisdiction | Filing Date | CP Start | CP End | CP Loss | Deadline |
|---|
| Ticker | Case Name | Status | CP Start | CP End | Deadline | Settlement Amt |
|---|
| Ticker | Name | Date | Analyst Firm | Up/Down | Target ($) | Rating Change | Rating Current |
|---|
Arguably representing the most anticipated financial disclosure of the year so far, Nvidia Corp (NASDAQ:NVDA) faced mounting headwinds. Not only was the competition heating up in the graphics processing unit (GPU) space, serious questions were starting to emerge about the business viability of artificial intelligence. While AI has become widely integrated into society, many companies have recently begun sporting wild valuations, leading to fears of a sector bubble.
As it turns out — at least from a fundamental perspective — such apprehensions were unnecessary for Nvidia. Delivering another blockbuster performance, the semiconductor juggernaut reported third-quarter revenue of $57 billion, up 62% against the year-ago level. This figure also beat Wall Street analysts' consensus target of $54.88 billion. On the bottom line, the company posted earnings per share of $1.30, also beating the consensus view of $1.25.
Even better, Nvidia disclosed guidance for fourth-quarter sales to land in a range between $63.7 billion and $66.3 billion. Ahead of the forecast, analysts were anticipating revenue to hit $61.48 billion.
"We've entered the virtuous cycle of AI. The AI ecosystem is scaling fast — with more new foundation model makers, more AI startups, across more industries, and in more countries. AI is going everywhere, doing everything, all at once," Nvidia CEO Jensen Huang confidently reported.
Unfortunately, the strong beat and guidance upgrade weren't enough to convince investors to hold the line. While NVDA stock popped in the after-hours session following the third-quarter disclosure, it suffered a noticeable decline in the following open-market session. To be sure, the rest of the market also faltered, largely due to concerns that the Federal Reserve may be pensive about a December rate cut.
Still, Wedbush analyst Dan Ives is willing to look at the long-term picture. Following Nvidia's earnings report, Ives noted on social media that the financial performance represented "a major validation moment for the AI Revolution," even though the rest of the market didn't apparently share that view at the moment the comment was made.
Later, in another post, Ives reiterated that the current anxiety is not indicative of an AI bubble and that Nvidia's strong demand for its key products like Blackwell should command investors' focus. Adding evidence to the assertion, Ives pointed out that only a small fraction of companies globally have adopted AI, which means the ramp-up could be intense.
The REX Shares ETF: For those who believe in the bullish angle — especially those who have high conviction — the options market tends to be one of the few accessible arenas for leverage. However, financial services provider REX Shares delivers an intriguing alternative in the form of a leveraged exchange-traded fund called T-Rex 2X Long Nvidia Daily Target ETF (BATS:NVDX).
Billed as the first 2X ETF focused exclusively on NVDA stock in the U.S., the NVDX ETF seeks 200% of the daily performance of the underlying semiconductor security before fees and expenses. What makes this fund stand out compared to other leveraged vehicles, though, is the total return swap mechanism.
A total return swap is a type of over-the-counter (OTC) derivative contract where two parties exchange the total return of an asset for a financing payment. In other words, one party receives all the gains and losses of an asset without actually owning it, and in return, this entity pays the other participant a financing fee.
Most importantly, the contractual agreement provides synthetic exposure to the underlying asset (because the receiver potentially enjoys the economic effect of ownership without actual ownership). In essence, the two parties swap cash flows instead of actual securities.
Naturally, a single-word question may arise: why? Mostly, in the case of the NVDX ETF, it comes down to extreme leverage. If actual securities were involved in the transaction, leveraging equity would involve margin, collateral and regulatory limits, among other concerns. With a total return swap, the notional amount involved can be negotiated, allowing for participants to take on massive positions with far less capital.
Of course, there are extreme risks involved with the NVDX ETF. Because swaps involve counterparty risk, it's possible that the other side may not hold up their end of the bargain. Furthermore, focusing exclusively on NVDA stock presents no opportunity for diversification if the underlying narrative goes sour. Most importantly, synthetic wagers are highly volatile. In this case, NVDX could suffer catastrophic losses in a single day.
Even extended periods of flat or mildly positive sessions may erode value due to volatility decay. As such, extra caution must be taken before considering the NVDX ETF.
The NVDX ETF: Since the start of the year, the T-Rex 2X Long Nvidia Daily Target ETF has gained about 23%. In the trailing half-year period, the bull fund is up more than 65%.
While investors may be concerned about an AI bubble, Nvidia's strong earnings report provided some relief on the fundamental front. For those who believe that the technicals will eventually catch up, the NVDX ETF may be an alternative to buying call options. To learn more about this "synthetic" platform, click here.
Featured image from Shutterstock
