Prediction: This biotech stock will outperform Nvidia later this year

NVIDIA (NVDA -1.66%) In terms of stock performance, it’s hard to beat: The tech giant’s shares have risen 2,500% over the past five years and are on track for a 118% increase this year.

There’s a good reason for this phenomenal growth: NVIDIA has an 80% share of the artificial intelligence (AI) chip market, one of the fastest growing segments today. As a result, NVIDIA’s revenue is growing by triple digits every quarter and continues to set new records.

While Nvidia is a great buy, it’s not the only stock that could be a winner in your portfolio in the second half of 2024. My expectation is that biotech stocks, especially those operating in dynamic sectors, will outperform the tech giant during this period (and have already outperformed Nvidia in the first half of the year).

The biotech company has lagged over the past six months, but major progress in its pipeline could give the stock the boost it needs to get back on track. Read on to learn more.

Image source: Getty Images.

The multi-billion dollar obesity drug market

Which biotech company are we talking about? Viking Therapeutics (VKTX -0.50%)The company is making strides in the obesity treatment market, which Goldman Sachs Research predicts will reach $100 billion in 10 years. Viking is developing a drug candidate known as a dual GIP/GLP-1 receptor agonist, similar to drugs already commercialized by Eli Lilly and Novo Nordisk.

These types of drugs, which act on hormones involved in the digestive process to control blood sugar levels and appetite, have become so popular that they have caused shortages on the market and forced Lilly and Novo Nordisk to expand production capacity.

Viking’s drug candidates have produced promising data in clinical trials. For example, a Phase 2 trial of its injectable drug candidate, VK2735, met its primary and all secondary endpoints, with patients losing up to 15% weight after 13 weeks. And a Phase 1 trial of a tablet version of the drug showed patients losing up to 5.3% weight in just 28 days. When these results were released earlier this year, investors were surprised and the stock price soared.

Viking plans to have a Phase 2 end of study meeting with the U.S. Food and Drug Administration for VK2735 in the second half of 2024. It is expected to then begin Phase 3 studies. The company also plans to begin Phase 2 studies of an oral version later this year. This progress could be the driving force behind a surge in the stock price in the coming months.

A potential acquisition target?

Investors have speculated that big biotech or pharmaceutical companies may consider Viking as an acquisition target to get into the fast-growing weight-loss drug market. Further speculation and concrete developments on the matter could keep Viking’s shares soaring later this year.

Meanwhile, NVIDIA may also rise given the impending launch of its new architecture Blackwell, the company’s most powerful chip to date. However, Viking’s stock price after pipeline developments has proven to outperform NVIDIA’s stock price after good news. When Viking reported strong data for the VK2735 earlier this year, the company’s stock price soared more than 120% in one trading session. NVIDIA rose about 9% in one trading session after announcing the start of a stock split (investors generally welcome this news).

Any positive news from the Vikings could lead to a significant gain, and we may see more news as the program progresses in the coming months.

Long-term investment

Of course, this is just short-term performance, and it’s important to consider the long-term potential before buying any stock, because holding solid companies for at least five years is how you can truly strengthen your portfolio.

Thanks to its current position and the drugs in its pipeline, we expect Lilly to dominate the weight-loss drug market, but given the large demand in the market, we think Viking could potentially gain share in the future, or even partner with another company.

Viking is a startup, not an established company like Eli Lilly, so it does carry some risk, but it also has strong growth potential if its pipeline programs continue to progress well. So this stock, which I expect to outperform NVIDIA in the second half of the year, could be a boon for investors in the long term.