The YieldMax NVDA Option Income Strategy ETF (NVDY) crashed by almost 17% on Monday in one of its worst days on record. It crashed to a low of $18.90, its lowest level since September 11. It has now plunged by over 23% from the year-to-date high. So, is it safe to buy the NVDA and the NVDY dips?
Are the DeepSeek jitters warranted?
The NVDA, NVDY, and other companies in the artificial intelligence (AI) industry plunged this week in the biggest wipeout in corporate America. NVIDIA’s market cap plunged by over $600 billion, which moved it from being the biggest company in the US to the third-biggest.
The crash happened as investors questioned NVIDIA’s growth path following DeepSeek’s success and popularity. DeepSeek, a Chinese company, launched last week as an open source alternative to popular applications like ChatGPT and Claude.
The company said that its total cost was less than $10 million, a small figure considering that its American peers have spent billions of dollars in the past few years. Just last week, Donald Trump witnessed the signing of a $500 billion agreement between Softbank, OpenAI, and Oracle.
The theory is that many large companies will now opt for cheaper alternatives to the highly expensive chips by NVIDIA. However, some experts, including the CEO of Scale AI, noted that DeepSeek had secretly deployed thousands of NVIDIA chips.
There are chances that these fears are unwarranted, as some analysts have argued. In a note, Anthony Pompliano warned that these fears and the collapse of NVIDIA was unwarranted. He argued that it was hard to believe anything coming from China, a country that has been caught making fraudulent claims fo a long time.
Pompliano also believes that if it is true that cheaper models will be beneficial to everyone, including firms like NVIDIA and Broadcom.
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NVDA earnings review
Recent financial results showed that NVIDIA’s business has performed well in the past few years. Its quarterly data center revenue jumped from over $3.6 billion in Q4 ’23 to over $30.7 billion, making it one of the fastest-growing stories on Wall Street.
NVIDIA’s quarterly revenue rose from $6 billion to $35 billion, a trend that was expected to continue ahead of the DeepSeek breakthrough.
Analysts expect the next results to show that the firm made over $38 billion, up by about 72% from the same quarter a year earlier. This growth will bring its annual revenue to about $130 billion. NVIDIA will publish the next earnings on 26th February.
Is NVDY ETF a good investment?
So, amid all this, is NVDY ETF a good investment? For starters, the NVDY ETF is a fund that aims to generate income by investing in NVDIA and then selling its call options. The call option gives the fund a premium, which it distributes to shareholders. NVDY has a dividend yield of about 18%.
The NVDY ETF has had a total return of 60.76% in the last 12 months, much lower than NVIDIA’s 132%. In most periods, such ETFs tend to underperform their underlying companies based on the total return approach.
For example, the Tesla stock has risen by over 108% in the last 12 months, while the TSLY ETF has jumped by 108%. Similarly, the Coinbase stock has jumped by 109%, while the CONY fund rose by 66% in the same period.
Therefore, assuming that investors overreacted on the DeepSeek issue, there are chances that the NVDA stock will have a higher total return than NVDY.
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