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Nvidia stock is through the roof — Here's how to manage a potential correction

Published 2024/05/24, 22:28
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Investing.com - Nvidia (NASDAQ:NVDA) shares are skyrocketing. In just two days, the tech company's stock has risen more than 10%, and its market value has surged by approximately $243.376 billion, surpassing $2.5 trillion and solidifying its position as the third most valuable company on Wall Street.

This surge follows the release of an impressive quarterly report, the announcement of a dividend increase, and a stock split, all of which have propelled the stock upward. The outlook remains positive due to the strong demand for AI processors.

But beware! With this explosive rise, the stock could be in overbought territory and somewhat overvalued. Additionally, there are risks of significant drops due to external factors such as a cooling demand or trade blockades, which could intensify if Donald Trump is elected in the upcoming U.S. presidential elections.

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InvestingPro's AI has identified Nvidia's potential early on and has included it in two of the ProPicks strategies: "Beat the S&P 500" and "Tech Titans."

The first strategy, Beat the S&P 500, consists of the 20 most profitable and high-potential stocks from the mentioned index, with the highest probability of leading gains among the largest companies on Wall Street.

This selection also includes other well-known giants like Tesla (NASDAQ:TSLA) and Meta Platforms (NASDAQ:META), but you'll also discover other stocks you might not have had on your radar that can make you money.

To gauge the effectiveness of this strategy, you can see that between January 2013 and April 2024, it recorded a return of 1,021.3%, outperforming the S&P 500's return of 251.9% by 769.4%.

In annualized terms, the strategy delivered a return of 23.8%, significantly higher than the S&P 500's 11.7%.

This calculation is obtained through a process known as backtesting, which evaluates the past performance and risk characteristics of a trading strategy using historical market data. Traders use backtesting to simulate how a particular trading strategy would have performed in the past, given specific rules and parameters.

If your interest in Nvidia is tech-focused, InvestingPro's AI has also included it in the "Tech Titans" strategy.

With this strategy, you can explore the most interesting tech opportunities from a selection of 15 leading-edge companies. This list, well-established and with considerable market capitalization, includes current sector leaders and emerging companies, all with impressive metrics and innovations.

Remarkably, between January 2013 and April 2024, "Tech Titans" recorded a return of almost 1,600%, surpassing the S&P 500's return of 251.9% by an impressive 1,343.4%.

This gives Tech Titans an annualized return of 28.4%, also exceeding the S&P 500's 11.7% and the Nasdaq Composite's 15.7%.

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