Date: 07/16/2023
Author: Mr. X
Back when I was running Rogue Investing Daily, I added Nvidia (NVDA) to the RID Model Portfolio on March 29, 2023. That wasn’t that long ago in the grand scheme of things. The entry price was $260.
A lot has happened since then. The AI boom has transformed the entire technology sector – really, the entire economy. It has also been the indispensable support for a bull market that has surprised many analysts who were expecting a catastrophic 2023.
Nvidia has been one of the greatest beneficiaries of this boom because it is the leading designer of graphics processing units (GPUs), which are extremely important in AI. (After all, they invented the GPU.) Nvidia isn’t resting on its laurels – it recently rolled out its GH200 Grace Hopper chip, a combination Central Processing Unit (CPU) and GPU that was specifically designed for large-scale AI operations.
OpenAI from ChatGPT, the app that changed everything, runs on the Nvidia H100 Hopper chip. Many of the biggest tech companies in the world, including Cisco, Lenovo, Dell, HP and others are building products around the chip. It is the frontrunner when it comes to AI chips. It is so obvious that Cathie Wood of ARK Invest is avoiding it simply because it is too obvious. She’s got a bad sense of timing here – she dumped in January before the recent increase.
In the first quarter, revenue for NVDA was at $7.19 billion. The second quarter is expected to bring in $11 billion in revenue. NVDA pays a dividend and founder and CEO Jensen Huang is setting a blistering pace with his ambition. “The computer industry is going through two simultaneous transitions – accelerated computing and generative AI,” he said. A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.“Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them.”
RIPPED STRAIGHT FROM THE HEADLINES… NOW MORE IMPORTANT THAN EVER
DON’T MISS THIS ABSOLUTELY CRITICAL PRESENTATION
Really, the only question is whether NVDA has any room to run. I think it does. In fact, I am very confident that legacy RID members who bought NVDA at the Model Portfolio price will soon boast a triple-digit gain once the stock hits $520. In fact, I expect that by the end of the year.
Rather amusingly, Citi analysts raised their target price for NVDA to $520 yesterday. You heard it here first!
The question is whether it is time to sell once it hits that. I suspect we will see a technical recession in 2024, though not the system-collapsing financial Armageddon many feared. But the AI market will only grow, and NVDA controls about 80% of that market. It has already joined the elevated ranks of companies valued at over one trillion dollars, joining the likes of Apple and Saudi Aramco. AI is likely to continue to build on its advantage.
That’s one of the terrifying things about AI – it will be a powerfully inegalitarian economic and political force. There is not really a way to overcome a lead in AI because of the massive account of technology, capital, and hardware needed to even get into the market. The whole point of AI is that it builds on itself. This is also why my “Trade of the Decade” – ASML Holding NV (ASML) – is also likely to hold up well. Without ASML, you can’t make the machinery needed to make chips.
Does that mean NVDA has no problems? Far from it. The biggest one derives precisely because of its profoundly inegalitarian nature. American policymakers are desperate to prevent China from gaining advanced chips that can be used from AI, and that could lead to restrictions on NVDA’s exports. That would be a significant blow to the company’s short-term prospects.
Yet if that occurs, that may be the last time to buy when the stock takes a hit. It’s because AI is a once-in-a-lifetime economic disruption that America doesn’t want the People’s Republic to even get in on the game. And the two most important companies in this disruption are ASML and NVDA.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing
