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HOW TO INVEST IN NVIDIA FROM GERMANY
NVIDIA is currently the star stock, experiencing a surge in value due to the rise of artificial intelligence and the critical demand for hardware, specifically semiconductors. Trades at the NASDAQ stock exchange in New York, the epicenter of technology stock trading in North America.
So, is it a good investment? Are there any potential pitfalls? What should I take into account when investing from Germany? This article will answer these questions and more.
Last Update
7. lokak. 2024
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Step-by-Step Guide to Investing in NVIDIA
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SELECT A STOCKBROKER
Choosing the right broker from the start is essential because changing brokers later is a hassle. It impacts your overall returns through fees, and provides necessary trading tools and resources. Starting with the right broker sets a solid foundation for successful investing.
OPEN A TRADING ACCOUNT
The Broker will ask you to verify your email address and upload personal docs via their app (Personalausweis or Passport and Proof of address, for example, E.ON Bill.
SELECT THE ACCOUNT BASE CURRENCY
This step is important because it might be a hustle to change it afterwards, and you will avoid foreign exchange fees. Remember that NVIDIA trades in USD.
BUY NVIDIA STOCK
Select 'NVDA' (Stock's Trading Symbol) at the Broker's Trading application, and then open an order to buy it at, either the market price, or the limit price that you select.
Stock Analysis: NVIDIA and the Technology Sector
NVIDIA focuses on designing and manufacturing graphics processing units (GPUs). It has also diversified its operations into other areas, becoming a leader in graphics, data centres, and artificial intelligence (AI), positioning itself at the centre of what many analysts call the "New Industrial Revolution" of information.
NVIDIA's Key Business Segments
NVIDIA's operations span several high-growth segments within the semiconductor and broader technology industries:
Graphics Processing Units (GPU): NVIDIA is best known for its GPUs used in gaming, professional visualization, and increasingly in AI and machine learning applications.
Data Centers: NVIDIA's data centre products, including its high-performance GPUs and AI computing solutions, are critical for data-intensive applications and cloud computing.
Artificial Intelligence (AI): NVIDIA provides hardware and software that drive AI research, autonomous vehicles, robotics, and more.
Automotive: NVIDIA's DRIVE platform offers solutions for autonomous driving, contributing to advancements in self-driving cars and intelligent vehicle systems (Tesla, for example, uses NVIDIA architecture).
Edge Computing: With the growth of IoT (Internet of Things) and the need for real-time data processing, NVIDIA's edge computing solutions are becoming increasingly relevant and, therefore, in demand by the public.
NVIDIA's Client List
Another perspective to analyze a stock as an investment is to consider who the company's clients are. This approach offers an idea of the 'league the company plays in' and provides information about potential increases or decreases in the stock's value.
When one of its major clients increases in value, the company's stock is likely to rise, and vice versa.
NVIDIA's major clients span a wide range of industries. Here is a brief list of the most notable clients:
Amazon Web Services (AWS): Uses NVIDIA GPUs for cloud computing and AI services.
Google Cloud: Implements NVIDIA GPUs to enhance both its AI and machine learning services.
Microsoft Azure: Integrates NVIDIA GPUs for cloud computing and AI services.
Apple: Uses NVIDIA technology in some of its products and for software development.
Dell: Integrates NVIDIA GPUs in its laptops and workstations.
HP: Uses NVIDIA GPUs on its personal computers and professional workstations.
Tesla: As previously mentioned, Tesla implements NVIDIA's AI solutions for its autonomous driving systems.
Toyota: Also uses NVIDIA's DRIVE platform to develop autonomous vehicle technology.
Activision Blizzard: Collaborates with NVIDIA to optimize games and graphics technologies.
Electronic Arts (EA): Uses NVIDIA GPUs to enhance the graphical performance of its video games.
JP Morgan: Utilizes NVIDIA technology to improve its data analysis and financial processing capabilities.
Challenges and Risks
However, it is not so rosy. Despite its strong market position, NVIDIA faces several challenges and risks.
Supply Chain Issues: The semiconductor industry has been affected by supply chain disruptions, impacting the availability of components.
Regulatory Risks: Geopolitical tensions and trade policies can affect NVIDIA's global operations and market access. Most of NVIDIA's high-performance chips are produced by TSMC (Taiwan Semiconductor Manufacturing Company) in Taiwan. Tensions between Taiwan and China pose a disruption risk if the Asian giant decides to block or intervene in the island.
Intense Competition: The competitive landscape requires constant innovation and investment in R&D to maintain market leadership.
Market Cyclicality: The semiconductor industry is subject to cyclical demand fluctuations, which can impact NVIDIA's financial performance.
So, Is NVIDIA a Good Investment?
Based on the information presented earlier, NVIDIA has consolidated itself as a segment leader and has experienced significant growth due to high demand for its solutions and products.
NVIDIA is at the forefront of innovation and has shown more than solid financial results: It is not a startup that has been losing money for decades but has continuous growth prospects. The company has strategic alliances with tech giants. All this leads to the answer to the question of this section being yes.
The skyrocketing price behaviour of NVIDIA's stock during 2023 and 2024 was the main reason the company decided to do a stock split, allowing retail investors to purchase the stock. This year's stock split was... 10-for-1! Read More on NVIDIA's stock split.
However, there are potential risks. The semiconductor industry is cyclical and can be volatile, affecting the stability of its revenues. NVIDIA also faces intense competition from companies like AMD and Intel, which require constant innovation. Conducting thorough research and staying informed is key. Let's analyze these matters further.
3 Key Factors to Consider When Investing in NVIDIA from Germany
Currency risk: The EUR-USD exchange rate can affect your returns when investing in NVIDIA shares. Hedging currency exposure may be helpful.
Late market hours: U.S. stock markets open in the afternoon and evening in Germany, meaning investors might need to stay up late or use automated trading tools to manage time zone differences.
Brokerage fees: Fees for trading U.S. stocks can vary between brokers in Germany. Compare platforms to find the most cost-effective option for buying NVIDIA shares.
Overview of the Semiconductor Industry
When investing in a particular stock and considering its value to rise, you should also consider the industry trends in which it operates. In other words, if you are going to invest in a stock that has value today, but the industry's trend is downward, you should analyze how this will affect your portfolio if you are a medium or long-term investor.
The semiconductor industry is crucial to the global economy, providing essential components for various electronic devices. Semiconductors are the backbone of modern electronics, from consumer devices to complex industrial systems. The key segments within this industry include microprocessors, memory chips, and integrated circuits.
Industry Trends and Growth Factors
Several trends and growth factors are shaping the industry in which the company operates:
Expansion of AI and Machine Learning: First and foremost, AI and machine learning are transforming various industries. GPUs (such as those from NVIDIA) are essential for training and deploying AI models.
Increase in the Number of Devices We Use: We are using more and more smart devices, so the demand for GPUs continues to grow, driven by gaming, professional visualization, and applications of these devices.
Growth of Data Centers: Expanding cloud computing and data-driven applications has increased demand for high-performance computing solutions.
Autonomous Vehicles: The automotive industry is experiencing a significant shift towards autonomous and intelligent vehicles.
Edge Computing and IoT: The proliferation of IoT devices and the need for real-time data processing drive the growth of Edge Computing.
5G Technology: Deploying 5G networks is expected to accelerate advancements in AI, IoT, and edge computing, providing new opportunities for NVIDIA.
Alternative Assets to NVIDIA
While NVIDIA is a leader in the technology industry and, as mentioned earlier, one of the top stocks, there are other alternatives to invest in the semiconductor industry.
There are two main alternatives by type of asset: Stocks or ETFs. ETFs, or exchange-traded funds, are investment funds traded on stock exchanges, similar to individual stocks. They generally track the performance of a specific index, sector, commodity, or asset class, providing diversified exposure to investors.
Let's start with alternative stocks to consider.
Alternative Stocks to NVIDIA
Advanced Micro Devices (AMD): AMD is a key competitor of Nvidia, known for its high-performance CPUs and GPUs. The company has gained significant market share in both consumer and enterprise markets. AMD produces GPUs for gaming, professional GPUs, CPUs, data centres, and semi-custom products.
Intel Corporation (INTC): Intel is one of the largest semiconductor companies in the world, and it is traditionally known for its CPUs. Recently, Intel has advanced into the GPU market with its Intel Xe line. In addition to CPUs and GPUs, Intel offers data centre solutions, IoT, and memory products.
Qualcomm Incorporated (QCOM): Qualcomm is a leader in wireless technology and semiconductor products. Although primarily known for its mobile processors (Snapdragon), it also develops AI solutions, IoT, and automotive chips.
Broadcom Inc. (AVGO): Broadcom designs, develops, and supplies semiconductor solutions and infrastructure software. The company has a strong presence in the networking and storage markets, offering networking chips, broadband, enterprise storage, and wireless solutions.
Micron Technology (MU): Micron specializes in memory and storage solutions, providing DRAM, NAND flash, and 3D XPoint memory products. Its technologies are critical for high-performance computing and data centres, including SSDs and storage solutions for mobile devices.
Texas Instruments Incorporated (TXN): Texas Instruments is an important player in the design and manufacture of semiconductors, with a diverse portfolio that includes analogue chips, embedded processors, and sensors for various industries, including automotive and industrial applications.
ASML Holding (ASML): ASML is a key supplier for semiconductor manufacturing. It is known for its photolithography machines, crucial for producing advanced chips. Hence, very much at the peak of the AI revolution, we are going through. Additionally, it offers semiconductor equipment and related services.
Taiwan Semiconductor Manufacturing Company (TSMC): TSMC is the world's largest contract semiconductor manufacturer. They produce chips for various applications and have a significant customer base, including NVIDIA, AMD, and Apple. Its key areas include semiconductor manufacturing, foundry services, and advanced process technologies.
Lam Research Corporation (LRCX): Lam Research provides wafer fabrication equipment and services for the semiconductor industry, supporting companies in chip production. Its technologies include semiconductor processing equipment, etching, and deposition.
Semiconductor-focused ETFs
In addition to individual stocks, investors can consider semiconductor ETFs that offer exposure to a complete portfolio of stocks from companies within the industry. Here are some of the main ones:
VanEck Vectors Semiconductor ETF (SMH): SMH tracks the performance of the MVIS US Listed Semiconductor 25 Index.
iShares PHLX SOX Semiconductor Sector Index ETF (SOXX): SOXX tracks the performance of the PHLX Semiconductor Sector Index.
SPDR S&P Semiconductor ETF (XSD): XSD tracks the performance of the S&P Semiconductor Select Industry Index.
First Trust NASDAQ Semiconductor ETF (FTXL): FTXL tracks the Nasdaq US Smart Semiconductor Index.
These ETFs provide a convenient way to gain diversified exposure to the semiconductor industry. As mentioned, each index fund replicates the stocks of different indexes, meaning the stock portfolio also has differences. Nonetheless, these ETFs allow for a reduction in investment risk associated with individual stocks.
While there are other investment alternatives, we only mention those most directly related to the asset we are analyzing.
Tips for Finding a Good Broker to Invest in NVIDIA Stock
Choosing the right broker is crucial as it is your gateway to investing in the financial markets.
A good broker facilitates transactions and provides the tools, resources, and support needed to make informed investment decisions. Before this section, we leave you a ranking of brokers that will interest you.
Here are some tips to help you find the broker that best suits your needs when investing in a leading technology company:
Regulation and Security: Ensure the broker is registered with major financial regulatory bodies. Investing in a large-scale company requires maximum security. Verify if the broker is a member of investor protection schemes that safeguard your funds.
Commissions and Fees: Compare commissions for buying and selling stocks. Some brokers offer "commission-free trades," which can benefit frequent traders but consider additional fees, such as account maintenance and withdrawal fees.
Trading Platform and Tools: Evaluate the platform's usability, speed, and reliability. Investing in cutting-edge technology requires advanced technical analysis tools and real-time data to make informed decisions.
Range of Investment Options: Ensure the broker provides access to a wide range of stocks in various global markets, particularly if you plan to diversify your investments in the tech sector. If you are interested in the sector as a whole, check if they also offer products like tech ETFs, mutual funds, and options that include leading tech companies.
Customer Service and Support: Test the broker's customer service by contacting them with questions before opening an account. Investing in high-volatility stocks requires fast and efficient support, which is essential during critical market moments.
Account Types and Minimums: Review the account types offered, such as individual, retirement, and margin accounts. Check the minimum deposit requirements and ensure they align with your financial capabilities, especially if you plan a substantial investment in a tech company.
Order Execution Speed and Quality: Research the broker's order execution speed and quality. Tech stocks are known for their volatility, so fast and precise execution is crucial to maximize gains and minimize losses.
NVIDIA is currently the star stock, experiencing a surge in value due to the rise of artificial intelligence and the critical demand for hardware, specifically semiconductors.
NVIDIA has become one of the leading stocks on the NASDAQ stock exchange in New York, the epicenter of technology stock trading in North America.
About the NASDAQ Stock Exchange
As we have repeatedly mentioned, the stock trades on the NASDAQ stock market in New York, one of the world's largest and most well-known stock exchanges.
Established in 1971, NASDAQ is renowned for its high-tech infrastructure and is home to many of the world's leading technology companies, such as Apple, Microsoft, Amazon, and Google.
With a high volume of trades, NASDAQ offers significant liquidity, making it easier for investors to buy and sell shares without causing major price fluctuations.
NASDAQ is synonymous with technology and innovation, hosting many of the world's leading tech companies and offering a platform for emerging growth companies.
Trading on NASDAQ
Stocks listed on NASDAQ are traded electronically through a network of computers rather than on a physical trading floor. This electronic system offers several advantages, including faster transaction times and greater transparency. Here's how stock trading works on NASDAQ:
Listing and Market Makers: Companies must meet stringent requirements to list their stocks on NASDAQ. Once listed, market makers—financial firms responsible for providing liquidity—facilitate trading by posting bids and asking stock prices.
Order Placement: Investors place buy or sell orders through their brokers. These orders are then sent to the NASDAQ network, which matches them with corresponding buy or sell orders.
Trade Execution: The trade is executed electronically when a match is found. The NASDAQ system ensures that trades are processed quickly, often in milliseconds, ensuring efficient price discovery and execution.
Regulation and Oversight: NASDAQ operates under the regulation of the US Securities and Exchange Commission (SEC) and adheres to strict rules to ensure fair trading practices and market integrity.
Trading Hours: NASDAQ operates during regular trading hours from 9:30 AM to 4:00 PM Eastern US Time, with pre-market and after-market trading sessions available for extended trading opportunities.
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Specific Strategies for Investing in NVIDIA Stock
We have already analyzed the stock, the fact that you need a broker as an intermediary, and the stock exchange where this stock is listed. The next question you should ask yourself is: How do I invest in NVIDIA? What types of investment strategies exist?
The answer to this last question is: It depends. Consider your investment goals, your time horizon (whether you want to buy and sell in a day or invest for the long term), and the available capital.
Below, we present some investment strategies applied to NVIDIA, from long-term to short-term.
Long-Term Investment
This strategy is ideal for investors who believe in long-term potential and are willing to hold their shares for several years.
Objective: Benefit from continuous growth in the semiconductor and advanced technology sectors, driven by the expansion of artificial intelligence (among other sectors).
Tips: NVIDIA continues expanding its presence in gaming, data centres, and automotive markets. Stay informed about their innovations and strategic acquisitions to maximize long-term benefits. Diversify your portfolio, but leverage NVIDIA's strength in cutting-edge technologies.
What to do in this strategy: Buy the shares and review their price at least once a week. Stay up to date with annual reports and important news about the company. Consider reinvesting dividends to take advantage of compound interest.
Medium-Term Investment
This strategy is for those looking for a few months to a couple of years investment horizon.
Objective: Capture capital gains during periods of expansion and new product launches.
Tips: Pay attention to quarterly earnings reports and industry news. Market reactions to financial results and new product announcements can offer medium-term investment opportunities.
What to do in this strategy: Review the company's earnings and news monthly. Adjust your positions based on market trends and quarterly evaluations. Consider selling part of your shares if they reach your target price.
Short-Term Investment
Short-term investments are ideal for those who prefer a more active strategy (not for the faint of heart), such as day trading or swing trading. Given the volatility of the technology sector, NVIDIA offers multiple opportunities to take advantage of daily price fluctuations.
Objective: Obtain quick gains from daily and weekly price fluctuations of the shares.
Tips: Use technical analysis to identify entry and exit points. Tools such as moving averages, Relative Strength Index (RSI), and MACD can be useful. Stay updated with market news and events that may impact NVIDIA's stock prices.
What to do in this strategy: Perform daily (or live) monitoring of stock prices and set stop-loss orders to limit losses. Use charts and technical indicators to determine optimal buy and sell moments. Stay informed about relevant news and economic events that may affect stock prices.
Check out our ranking of the best apps for Day Trading.
So, your investment horizon will determine which strategy you should follow, whether you prefer long-term, buying the shares and forgetting about daily price swings, or the adrenaline of short-term trading.
Key Findings
Investing in stocks requires a deep understanding of both NVIDIA's products and market segments and the industry in which it operates.
Evaluating available alternatives, such as other stocks within the same sector and different types of alternative assets, is essential for building a solid and diversified portfolio.
Choosing a good broker and adopting investment strategies that align with your objectives and time horizon are fundamental steps to maximize your returns and manage risk.
Choose the right strategy: A long-term strategy like buy and hold differs from a short-term strategy like day trading.
Finally, staying updated with market trends and being willing to adjust your strategy as needed will help you navigate the dynamic world of investing.