For the first time in decades, there is a massive discrepancy between the Nasdaq (NASDAQ: QQQ) and its bedfellows, the S&P 500 (NYSEARCA: VOO) and Dow Jones (NYSEARCA: DIA). The tech-heavy Nasdaq has its Silicon Valley pals to thank for its 51% rally from mid-March lows, while the other indexes remain in the red thus far in 2020.
Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), Alphabet (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN) have been the big players for many years now, and the driving force behind the Nasdaq’s rally — it didn’t hurt to have pandemic winners like Netflix (NASDAQ: NFLX), Peloton (NASDAQ: PTON), and Zoom (NASDAQ: ZM) either though.
However, while the dominance of big tech is relatively unchallenged, who is to say that it can’t make room for another member soon? Or maybe two…
I am a big fan of Nvidia (NASDAQ: NVDA) and have made it one of my portfolio’s largest holdings, but you won’t find any bias here, just facts: this company is going places. The chipmaker, famous for its top-of-the-line graphics processing units (GPU), has seen its stock soar more than 100% since the market-wide March sell-off and has extended its rally into July, rising 4% so far this month.
Though it only appears to be making major headlines recently, Nvidia is no spring chicken and has been in the chip-making game for decades, going public back in 1999. It experienced exponential growth in the last 5 years though in which time it has soared roughly 1,900%, far more than any FAAMG members in the same period, of whom Amazon has risen the most at around 570%. What’s more, one of its biggest rivals, Intel (NASDAQ: INTC), has just been dealt a major blow in losing Apple as a client. This leaves Nvidia essentially sharing a duopoly in the GPU business with Advanced Micro Devices (NASDAQ: AMD).
While Nvidia’s GPU business dropped 7% in 2019 due to reduced PC and notebook sales across the sector, its other businesses are booming. Total revenue is expected to reach $13 billion this year, even with the effects of the coronavirus, up from $11 billion last year, which is a lot less than anything generated by Big Tech currently, but its growth pattern should see it rival those giants in the next decade if it stays on its current path, and its $240 billion market cap just keeps ticking upwards.
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Nvidia is showing no signs of slowing down, with a visionary CEO in Jensen Huang, an expansion into AI, improvements in gaming, and even a move into autonomous vehicles through a partnership with Mercedes in a bid to take on Tesla (NASDAQ: TSLA). Actually, speaking of…
What’s left to say about Tesla’s stock market rally other than ‘wow’? Rallying 234% since its March lows, Tesla just cruised past the $1,000 per share mark and has its sights on $2,000 after becoming the most valuable automaker in the world with a market cap of roughly $250 billion.
Tesla has a lot of competitors in Ford (NYSE: F), GM (NYSE: GM), NIO (NYSE: NIO), and Nikola Motors (NASDAQ: NKLA), but none of them are hitting the same levels — despite both Ford and GM posting far more annual revenue. On Wall Street, it’s all about potential. There’s no denying that Tesla is a very divisive stock — you’re either a fanatic or you view it as a hype stock in the vein of Beyond Meat (NASDAQ: BYND) or Virgin Galactic (NYSE: SPCE).
However, the short-sellers and naysayers have been the losing side of this debate so far as Elon Musk brings his company from strength to strength; it is just one profitable quarter away from qualifying for inclusion in the S&P 500 index. Tesla’s growth has been down to clever expansion in the U.S. and China, where its Shanghai Gigafactory has become an important cog in its wheel as China represents the world’s fastest-growing EV market with a CAGR of 25% between 2020 and 2025.
If Tesla continues to hit targets in the way it has lately — it delivered 90,650 units in Q2 compared to 72,000 expected — then there is no knowing quite how high this company can go. As the hottest stock on Wall Street right now, surely several more years of growth and some profitable annual returns should see it considered alongside Big Tech?
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.