Nvidia (NASDAQ:NVDA) stock has gone from hot to scorching since we rang in the new year. Undoubtedly, it’s hard not to want to be in one of the most influential artificial intelligence (AI) companies on planet Earth. However, it’s also tough to get behind a stock that’s nearly tripled in two years (up around 180%) and over 1,700% in five years.
In many ways, such hot returns are how bubbles form. And once the punch bowl is finally taken away from investors, the losses could hit hard and fast. While I’m a believer in the AI chip giant, which could soon find itself sporting a $2 trillion market cap (it’s like Nvidia came from out of nowhere in the last few years!), it’s unsettling that the stock would still be up big-time from just one year ago if shares were to be cut in half from current levels.
Indeed, one can’t help but imagine the consequences of being too late to a hot trade. And though momentum investing may work for some, I’m more of an advocate for buying after sizeable plunges. These days, I believe there are more enticing bets for investors who want to get in on the rise of AI without the potential downside risks.
How long can Nvidia continue sprinting at full speed as others demand nothing short of perfection?
That’s the trillion-dollar question; I don’t think anybody has all the answers. If you’re keen on NVDA stock, taking a tiny stake (one that you’d be willing to part ways with) does make sense. But for everyone else, there are still hot investments that may not be nearly as crowded.
Though Nvidia stock will eventually get hit with a bearish descent (it’s done so before), I have no idea if it’ll double up again before its next drastic fall. High risks often accompany high rewards. In any case, here are two stocks that may also be worth watching if you’re in the mood for a high-momentum hero. However, please be mindful of the risks of betting on high-flying momentum plays.
Momentum in itself is not a bad thing. Heck, it’s a good thing as long as the fundamentals are improving faster than share price appreciation.
Aritzia stock: Hot but not as hyped as Nvidia stock
Consider shares of Aritzia (TSX:ATZ), a women’s clothing retailer that’s in the process of rebounding from its crash off 2022 all-time highs of around $61 per share. Though the recent post-quarter melt-up has drawn in a considerable amount of momentum chasers, especially in the Canadian market, it appears nowhere near as hyped as the likes of an AI play like Nvidia.
Further, Aritzia could see multiple compression at the hands of faster earnings growth once the North American economy recovers. You see, discretionary goods (like hot fashions) that aren’t riding on hot secular trends (think AI) are prone to booms and busts. With signals that we could be moving from a bust to a boom, I think Aritzia may be in the early innings of its next bull run. Either way, I’d be less hesitant to buy ATZ over NVDA at these heights.
Year to date, ATZ stock is up 48%, about the same as NVDA stock (it’s up 50%). The only difference is that NVDA is melting up after a year that already saw incredible gains, while ATZ is still a ways away from its multi-year all-time highs.
