Nvidia Numero Uno Selling Shovels in the AI Gold Rush
Companies / Nvidia Oct 28, 2024 - 01:34 PM GMTBy: Nadeem_Walayat
Folk need to realise that the likes of Chat GPT are mere milestones and not the final destination. As I have said before OpenAI will probably soon become a footnote in the history books. LLM's are a toy compared to what's to come but this also means all those companies going all in on LLM's won't survive or not capitalise on their investments. This is what a bubble looks like, inflated on ever higher expectations as is happening with LLM's when they are just toys. We are probably looking at the top of the LLM's bubble that will give way to the next phase in this building AI bubble where what remains at the core of the AI mega-trend is Nvidia with it's GPU's now rebranded as a family of AI processors or which more accurately should be called compute accelerators. So it was well past the time for Nvidia to become the NEW Numero Uno, with Google nudged to 2nd place in my Quantum AI tech stocks portfolio as we watch Nvidia getting rich by selling AI shovels to ALL of the tech giants. And in this case the shovels have an expiry date as they become OBSOLETE! At the maximum for most applications the life span of the infrastructure Nvidia is selling is 5 years! So not only is the Accelerated Compute market growing, all of the hardware also needs to be refreshed every 4-5 years!
Bottom line you want to be very careful of over trimming Nvidia, it's better to suffer deep draw downs then be sat on the bench watching this gravy train speed past. A mistake most of us have made in numero Uno from time to time as the dips all too soon give way to new all time highs.
Nvidia Numero Uno!
Nvidia is the new numero uno in my AI tech stocks spreadsheet switching places with Google. What does this mean? I have upped target exposure for Nvidia by 10% and reduced Google by 10%. Why? Because Nvidia IS AI, and whilst Google's stock price has done well, it's definitely not better than Nvidia. So I will be even more eager to add to Nvidia whilst seeking to reduce Google a little to around 75% invested.
Nvidia Earnings - $128.3, EGF 42%, 69%, Dir+4%, PE Range 79%, Forward 28%
Nvidia's metrics remain STRONG pointing to another earnings beat and thus expectations are for a positive stock price reaction to earnings. However before folk start running to add more at the current price understand that today's Nvidia is not that of even a year ago, today's Nvidia has a massive market cap of $3.2 trillion, let that sink in Nvidia has x14'd it's market cap in less than 2 years! It is easier for a stock to go from say $1trillion to $3 trillion than to just x2 from $3.2 trillion to $6.4 trillion. So most of the growth in the stock price for the the next year or so is behind Nvidia, that's not to say it cannot keep trending higher by perhaps another 50% to $200, but it's already gone up by near 50% from it's recent correction low of $92 which is how the money will be made in this stock by accumulating on the corrections and then trimming on the rips and rebounds, those who buy and hold for say $200 are going to find it a rough ride because you are asking for a $3.2 trillion stock to near X2 to $6.4 trillion, which is a tough ask, much easier to expect a X2 from $2 trillion to $4 trillion i.e. from $92 then from $128. So whilst I do want to have heavy exposure to Nvidia which is clearly at the core of the AI mega-trend, however I can see it is going to be difficult for a $3.2 trillion stock to X2 to $6.4 trillion hence if any stock is ripe for deep corrections on market FEARs then that stock is Nvidia as we witnessed barely 3 weeks ago when it dived from a high of $140 down to $92, which prompted me to double my exposure from 10% to 20%. currently trimmed down to 18.3%.
Can Nvidia 14X again? Yes but not over the next 2 years, maybe over the next 14 years.
The bottom line is that Nvidia is now too big for easy growth. It WILL continue to grow earnings and coupled with multiples expansion the stock price should go higher i.e. target $200 but the easy gains are in the rear view mirror thus despite Nvidia being numero Uno I am only 18% invested where I seek to accumulate via buying the dips and distribute some of what I bought by selling the FOMO rips and thus as my exposure increases my average price paid per share goes DOWN. Which yes is hard work but that's how to play the likes of Nvidia, you want to accumulate when the stock is cheaper which gives one the potential upside to trim into all whilst seeking to increase exposure because in this stock at least the draw downs will be temporary, which is self evident not just from the metrics but also by understanding what this company actually does and likewise AMD despite crushing Intel is not in the same league as Nvidia, NO stock is in the same league as Nvidia! Even if the whole stock market crashed and burned what you will soon see is that Nvidia would rebounds to trade to a new all time high as we got a taste of during this month.
At the end of the day it's a balancing act between having exposure and over paying for a mega cap stock. The easiest thing to do would be to just invest and forget, which really does mean invest and forget, i.e. not asking why it has suddenly dropped by 40% that's not invest and forget! Personally I can't do that for stocks such as Nvidia, it's too volatile to not try and capitalise on the volatility hence you see me cycling in and out of Nvidia depending on what the stock price does whilst attempting to build a core position in the stock because regardless of what stock prices do, the AI Mega-trend is going to run for decades more to come as I explained why in this video of now 8 years ago....
Nvidia Stock Chart
As i stated in my last article posted just ahead of the flash crash, Nvidia falling below $100 would be us getting lucky and we DID get lucky as the stock chart illustrates as the price dipped below $100 down to $92 and then abruptly rebounded as smart money capitalised on the yen carry trade market panic nothing burger. We can hope for similar events but Nvidia falling below $100 would again be getting lucky given that Nvidia still trades below it's two near term highs of $135 and $140 it is possible that we could see Nvidia trade down to $100 i.e. range bound given that we remain in a corrective window into early October that is resulting in increased market volatility even in stocks such as Nvidia.
(Charts courtesy of stockcharts.com)
Nvidia is in a trading range of $135 to $100 pending a breakout to a NEW ALL TIME HIGH where another short lived dip below $100 would be a case of getting lucky so I will seek to accumulate more Nvidia towards the lower end of it's trading range as we continue to trade within the general stock markets corrective window that extends into early October.
And what if Nvidia misses earnings?
That would be fantastic news! Because BAD news is what delivers the BUYING OPPs! The likes of which folk look back on and wish they had capitalised on at the time but were too scared to do so because instead of BTFD they were sat paralysed by fear. As Aug 5th illustrates, as Oct 2022 illustrates, you want to BUY FEAR!
The bottom line is I want Nvidia to be my largest holding, the hard part is getting there from here..... Nvidia is a hard stock to accumulate given that the buying opps tend to be rare and it has a tendency to keep blasting off to new all time highs which is probably what it's going to do once more after today's market close.
This article is an excerpt from extensive analysis Nvidia Earnings vs Stock Market Correction Window that was first made available to patrons who support my work. So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $7 per month, lock it in now at $7 before next rises to $10 per month for new sign-ups. https://www.patreon.com/Nadeem_Walayat.
My most recent article - Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump!
CONTENTS
Stock Market Correction Window
Stocks Bull Market Smoking Gun
Stock Market Intra Year Cycle
The Risks are to the Upside!
DOCU LIVES!
Nvidia Numero Uno
TRIMMING VS REBUYS
S&P ETF Passive Investing Bubble Mania
AI Stocks Portfolio Q3 Earnings Season
23rd - TSLA - $218 - EGF -7%, +13%, Dir +16%, P/E 93, PE Range 208% / 161%
23rd - IBM $232 - EGF -8, +1%, Dir +14%, PE 22.8, PE range 102% / 69%
23rd - Lam Research - $73.1, EGF +6%, +27%, Dir -3%. PE 24.1, PE Range 102% / 69%
24th - WDC $67, PE -177
29th - Google $166 - EGF +7%, +17%, Dir -8%, PE 23.9, PE Range 60% / 24%.
29th - AMD $154 - EGF's +15%, +54%, Dir +19%, PE 55, PE Range 95% / 51%
30th - META $582 - EGF +5%, +16%, Dir -1%. PE 29.7, PE Range 124% / 95%
Bitcoin Blood Bath Revisited.- PAIN IS GOOD!
Bitcoin Gift Bull Market Targets
BItcoin on the Launch Pad Awaiting President Donald Pump!
Crypto Market Caps
SCALING OUT OF THE BULL MARKET
UK Budget 2024
Recent analysis includes -
Stock Market October Correction Window Into Post US Election Rip the Face Off the Bears Rally
Stock Market Trend Forecast Sept 2024 to Jan 2025
Nvidia Earnings vs Stock Market Correction Window
And access to my exclusive to patron's only content such as the How to Really Get Rich series.
Change the Way You THINK! How to Really Get RICH Guide 2023
Learn to Use the FORCE! How to Really Get Rich Part 2 of 3
The Investing Assets Spectrum - How to Really Get RICH
Here's what you get access to for just $7 per month -
※ Patrons Get FIRST access to all of my In-depth analysis and high probability Trend Forecasts, usually 2 full months before the rest of the world. Notified by Patreon by email as well as posted on this page and I will also send a short message in case the extensive email does not make it to your inbox.
※Access to my carefully constructed and maintained AI Tech Stocks Portfolio that is updated on an ongoing basis, that includes on going commentary and a comprehensive spreadsheet that features unique innovations such as the remarkably useful EGF's.
※A concise to the point Investing Guide that explains my key strategies and rules
※ Regular content on How to Trade & Invest incorporated into most articles so as to keep patrons eyes on the big picture and net get too sucked into the noise of price swings.
※ Access to my comprehensive How to Really Get Rich series of articles, clear concise steps that I will seek to update annually and may also eventually form a Patrons only ebook.
※ Access to conclusions from my ongoing market studies from a total of over 200 conducted studies over the decades. updated whenever the market poses a question to be answered. Also enjoy the fruits of R&D into machine learning such as the CI18 Crash indicator that correctly called both the pandemic crash (Feb 2020) and the 2022 bear market (Dec 2021) well before the fact.
※Join our community where I reply to comments and engage with patrons in discussions.
※ I will also keep my Patrons informed of what I am currently working on each month.
※ Influence over my analysis schedule.
My objective is to provide on average 2 pieces of in-depth analysis per month and regular interim pieces of analysis as market briefs. So over a 12 month period expect to receive at least 24 pieces of in-depth analysis. Though my focus is on providing quality over quantity as you can see from the extent and depth of my analysis which I deem necessary so as to arrive at that which is the most probable market outcome.
So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $7 per month, lock it in now at $7 before next rises to $10 per month for new sign-ups. https://www.patreon.com/Nadeem_Walayat.
And ensure you are subscribed to my ALWAYS FREE newsletter for my next in-depth analysis.
Your analyst.
By Nadeem Walayat
Copyright © 2005-2024 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
Nadeem Walayat Archive |
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
