With just a few days until the Nasdaq-100’s rebalancing, investors are watching tech stocks closely. Specifically, they are keenly watching seven leading companies that stand to be impacted when the index rebalances its weight. These stocks, known as the “Magnificent Seven,” represent 55% of the Nasdaq-100’s weight. Near the front of the pack is Nvidia (NASDAQ:NVDA), a Silicon Valley standout that joined the trillion-dollar club this year. NVDA stock has seen tremendous growth this year as the artificial intelligence (AI) boom has transformed entire industries.
But as the chipmaker prepares for the index’s rebalancing, investors may be wondering if NVDA stock is still worth buying. The index’s operations will commence the actual changes to the Nasdaq-100 on July 24.
What the Rebalancing Means for NVDA Stock
It’s been a difficult day for NVDA stock, which is down just shy of 1% as of this writing. At first glance, it’s easy to assume that this is due to the uncertainty caused by the pending rebalancing. However, Nvidia’s overall performance over the past week has been good. Despite some volatility, it is still up more than 5% for the past week. Not only that, but share prices recently hit a record high, surpassing $480 per share. This should signal to investors that despite a potential negative catalyst that is quickly approaching, NVDA is a stock that can hold its own against market headwinds.
InvestorPlace contributor Josh Enomoto recently addressed the question of if investors should be worried about NVDA stock in the face of the rebalancing. As he sees it, the answer is likely no. In his words:
“Largely, enthusiasm for the tech stalwart continues to run hot, thanks to analyst support. For instance, Citi analyst Atif Malik boosted his price target of NVDA to $520 from $420 on Monday. ‘To us, it is clear the market for [artificial intelligence] accelerators is bound to grow at a blistering pace,’ the expert wrote.
Given Nvidia’s advantage in the AI arena, the company can potentially power through a wall of worry despite a possible hiccup next week.”
Enomoto’s point is well taken. While markets will adjust to the rebalancing, AI enthusiasm from large-scale investors isn’t slowing down anytime soon. Any turbulence that Nvidia encounters isn’t likely to be more than a hiccup, if that. Investors should treat this event as a light storm that their ship can comfortably ride out.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
