A Horse Named Nvdia That Raced Like NVDA Stock

Possibly a case of horseracing imitating the ups and downs of investing in Nvidia.

From high-stakes bets, to winners and losers, from good luck to bad: horse-racing and investing share terms, metaphors and emotions.

Now they share Nvidia. Or in this case, Nvdia.

As noted in past writings, I'm a horse-racing fan and enjoy small-time wagers, big time fun with a bit of ownership and handicapping mixed in. What can be better for an investing writer than arriving at the track to find a thoroughbred racehorse obviously named for the iconic trillion-dollar stock NVDA. 

The pony, a two-year-old named Nvdia (the spelling either a licensing issue or a misspelling in the registration form) had quite a moment last Sunday at Gulfstream Park, the year-round racetrack in my area in South Florida.  

Here's a link to the second race at Gulfstream from last Sunday. Watch the #6 horse, Nvdia, starting at about the 40 second mark. Over the next 30 seconds, we see the horse charge toward the lead, just as Nvidia rallied to join Apple and Microsoft atop the SPDR S&P 500 Trust ETF (SPY) and many others.

But as the final stage of the race ensues, the horse moves around in a way I can only describe it as akin to what investors have experienced lately with ETFs that own large positions in it. See for yourself.

Funds like the VanEck Semiconductor ETF (SMH), in which Nvidia (the stock, not the racehorse) occupies one-fifth of assets, is indicative of the roller coaster ride that investors have had recently, just when they thought the proverbial race was won. As of last Friday, that ETF gave back all its 33% gain since the end of February. 

The S&P 500 is up 7% over that time, as other market sectors and stocks have narrowed the distance that semiconductor stocks had between themselves and the rest of the horses in the proverbial race. And that fall from the top occurred in only two months.

NVDA, SMH: Lessons in Horses and Risk

This is the state of equity investing today. The ETFs that track forward-looking high potential growth segments of the stock market are gyrating in ways we have not seen in a while. That means that advisors and investors can essentially think of those high potential growth prospects as situations where volatility is a feature, not a bug.

In the case of Nvdia, the horse that sounds like the stock but is missing a letter I, he finished second in that race last Sunday. Maybe he would have won if he took a straighter path than the one seen on the video replay link, but I’ll leave that to the experts in the racing analysis business.  

But there is a metaphor here that is timely for investors and advisors alike. Pay careful attention not only to investment goals, but the preferred path to reaching them. It is easy to say we’ll stay on the horse when it starts to act wildly. But once you are on the horse, or invested in volatile ETFs, that’s when the true test of risk tolerance comes.