DiscoverGold
1 day ago
Options Traders Still Love Nvidia (NVDA) Stock
By: Schaeffer's Investment Research | May 16, 2024
⢠NVDA continues to draw options traders ahead of earnings
⢠The chip name reports earnings on Wednesday, May 22
Ahead of its earnings report after the close on Wednesday, May 22, Nvidia Corp (NASDAQ:NVDA) stock once again took second place on Schaeffer's Senior Quantitative Analyst Rocky White's list of names that attracted the most options volume during the last two weeks. The equity saw 7,764,113 calls and 4,943,247 puts traded in the last 10 trading days, with the weekly 5/10 900-strike call standing out as the most active contract.
Shares of the semiconductor firm have a positive history of post-earnings reactions over the past two years. Specifically, six of these eight next-day sessions were higher, including a 16.4% pop in February. Options traders are pricing in an 11.7% post-earnings swing for the equity this time, which is much larger than the 8.5% move it averaged after its last eight reports, regardless of direction.
Considering the chip stock sports a 91.5% year-to-date gain, it's no surprise that bulls are outpacing bears. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 1.47 ranks higher than 71% of readings from the past 12 months.
Last seen 0.2% higher at to trade at $948.17, NVDA is attempting to surpass a March 8, record high of $974. The stock yesterday broke above short-term resistance at the $930 level, and sports a massive 214.5% lead.
Read Full Story 
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DiscoverGold
2 days ago
Bull of the Day: Nvidia (NVDA)
By: Zacks Investment Research | May 15, 2024
Company Overview
Zacks Rank #1 (Strong Buy) stock Nvidia (NVDA) is the global leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Though Nvidia has been growing for years due to revenue streams from PC graphics and gaming and virtual reality (VR) platforms, the company has experienced exploding, âhockey stickâ like growth for its artificial intelligence (AI) solutions that support high-performance computing (HPC). Revenue from Nvidiaâs complex and powerful chips has lifted NVDA to a more than $2 trillion market cap and has solidified the company as the undisputed leader in the AI space, far ahead of semiconductor competitors like Intel (INTC) and Advanced Micro Devices (AMD).
Blackwell Platform is a Bullish Catalyst
Though Nvidia is already the dominant player in the AI space, visionary CEO Jensen Huang is not sitting back and enjoying the success. Instead, NVDA recently announced the Blackwell platform, âenabling organizations everywhere to build and run real-time generative AI on trillion-parameter large language models at up to 25x less cost and energy consumption than its predecessor.â
As mega-cap tech companies race to AI dominance, large language models like Open AI and Microsoftâs (MSFT) ChatGPT will require efficiency for two reasons. First, large language models like ChatGPT require GPUs to âtrainâ their models. Presently, companies like OpenAI and Alphabet (GOOGL) are engaged in an AI arms race. Furthermore, by 2030 the data center share of electricity will be the equivalent of the electricity consumption of one-third of U.S. homes (which explains the recent bull trends in utility stocks like Vistra (VST).
Explosive Growth Expected
Earnings, which have already been growing like a weed, are expected to increase by a triple-digit clip over the next two quarters and juicy 84.72% next year.
Image Source: Zacks Investment Research
Technical View
Price is the ultimate âtellâ in investing because it represents real supply and demand. From this standpoint, Nvidia is bullish for two reasons:
Relative Strength: While some AI-related stocks like Arm Holdings (ARM) and Super Micro Computer (SMCI) are well off their 52-week highs, NVDA is suffering a mild correction and is within 10% of its all-time high â a sign of relative strength.
Shakeout + Regain of 10-week MA: If investing were easy, everybody would be rich. Every so often stocks need to âshake the treeâ and get rid of âweak handsâ before resuming higher. NVDA plunged nearly 10% in mid-May before ripping back above the 10-week moving average (a level that has contained most of the stockâs multiyear move.
Image Source: TradingView
Valuation is Still Cheap
Amateur investors often make the mistake of conflating an appreciating stock price with a company being âovervalued.â However, NVDAâs Price-to-Earnings Growth (PEG) ratio is near a multiyear low and remains cheap.
Image Source: Zacks Investment Research
Earnings ESP + Zacks Rank #1
Our extensive, in-house back test shows that stocks that sport a Zacks Rank #3 or better and have a positive Earnings Surprise Prediction (ESP) score tend to beat earnings and outperform. Furthermore, while Wall Street is bullish on the stock, NVDA has beaten consensus estimates in 18 of the past 20 quarters.
Image Source: Zacks Investment Research
Cloud Demand
Data center demand is not only due to AI, but also to cloud growth. Companies like Amazon (AMZN), Meta Platforms, and Baidu (BIDU) are all investing billions in expanding their cloud presence.
EV Opportunities
As automakers strive for autonomous vehicles, Nvidia stands to benefit. The company is working with more than 320 automakers, suppliers, and automotive research institutions to develop AI systems for self-driving vehicles.
Bottom Line
Data center and AI growth, top-tier fundamentals, and new product offerings are just a few reasons to own Nvidia, the true market leader.
Read Full Story 
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cadillacdave
3 days ago
I don't exclude the possibility that NVDA could dip down to $850, but I doubt that it would stay in that range for a few months.
It is even less likely, since there is a major catalyst coming soon (earnings), which could propel the stock 13%-17% in either direction, based on my highly scientific - back of the napkin estimates, while sipping fine Bourbon.
Based on current events with NVDA and barring geo-political unrest, my bet would be that earnings will go well, and the stock should move higher, thereby discrediting the chartmaster's recent theories, which he has generously posted here to assist everyone.
The "fairly simple" part is just a little humor, betting against the chartmaster, since his "fill the gap to $680" prediction, seems to be off course, at this juncture.
JJ8
3 days ago
NVIDIA Accelerates Quantum Computing Centers Worldwide With CUDA-Q Platform
May 13 2024 - 2:00AM
ISC -- NVIDIA today announced that it will accelerate quantum computing efforts at national supercomputing centers around the world with the open-source NVIDIA CUDA-Q™ platform.
Supercomputing sites in Germany, Japan and Poland will use the platform to power the quantum processing units (QPUs) inside their NVIDIA-accelerated high-performance computing systems.
QPUs are the brains of quantum computers that use the behavior of particles like electrons or photons to calculate differently than traditional processors, with the potential to make certain types of calculations faster.
Germanyâs JĂźlich Supercomputing Centre (JSC) at Forschungszentrum JĂźlich is installing a QPU built by IQM Quantum Computers as a complement to its JUPITER supercomputer, supercharged by the NVIDIA GH200 Grace Hopper™ Superchip.
The ABCI-Q supercomputer, located at the National Institute of Advanced Industrial Science and Technology (AIST) in Japan, is designed to advance the nationâs quantum computing initiative. Powered by the NVIDIA Hopper™ architecture, the system will add a QPU from QuEra.
Polandâs Poznan Supercomputing and Networking Center (PSNC) has recently installed two photonic QPUs, built by ORCA Computing, connected to a new supercomputer partition accelerated by NVIDIA Hopper.
âUseful quantum computing will be enabled by the tight integration of quantum with GPU supercomputing,â said Tim Costa, director of quantum and HPC at NVIDIA. âNVIDIAâs quantum computing platform equips pioneers such as AIST, JSC and PSNC to push the boundaries of scientific discovery and advance the state of the art in quantum-integrated supercomputing.â
The QPU integrated with ABCI-Q will enable researchers at AIST to investigate quantum applications in AI, energy and biology, utilizing Rubidium atoms controlled by laser light as qubits to perform calculations. These are the same type of atoms used in precision atomic clocks. Each atom is identical, providing a promising method of achieving a large-scale, high-fidelity quantum processor.
âJapanâs researchers will make progress toward practical quantum computing applications with the ABCI-Q quantum-classical accelerated supercomputer,â said Masahiro Horibe, deputy director of G-QuAT/AIST. âNVIDIA is helping these pioneers push the boundaries of quantum computing research.â
PSNCâs QPUs will enable researchers to explore biology, chemistry and machine learning with two PT-1 quantum photonics systems. The systems use single photons, or packets of light, at telecom frequencies as qubits. This allows for a distributed, scalable and modular quantum architecture using standard, off-the-shelf telecom components.
âOur collaboration with ORCA and NVIDIA has allowed us to create a unique environment and build a new quantum-classical hybrid system at PSNC,â said Krzysztof Kurowski, CTO and deputy director of PSNC. âThe open, easy integration and programming of multiple QPUs and GPUs efficiently managed by user-centric services is critical for developers and users. This close collaboration paves the way for a new generation of quantum-accelerated supercomputers for many innovative application areas, not tomorrow, but today.â
The QPU integrated with JUPITER will enable JSC researchers to develop quantum applications for chemical simulations and optimization problems as well as demonstrate how classical supercomputers can be accelerated by quantum computers. It is built with superconducting qubits, or electronic resonant circuits, that can be manufactured to behave as artificial atoms at low temperatures.
âQuantum computing is being brought closer by hybrid quantum-classical accelerated supercomputing,â said Kristel Michielsen, head of the quantum information processing group at JSC. âThrough our ongoing collaboration with NVIDIA, JSCâs researchers will advance the fields of quantum computing as well as chemistry and material science.â
By tightly integrating quantum computers with supercomputers, CUDA-Q also enables quantum computing with AI to solve problems such as noisy qubits and develop efficient algorithms.
CUDA-Q is an open-source and QPU-agnostic quantum-classical accelerated supercomputing platform. It is used by the majority of the companies deploying QPUs and delivers best-in-class performance.
About NVIDIA
NVIDIA (NASDAQ: NVDA) is the world leader in accelerated computing.
rolvram
3 days ago
Jim Cramer and Ken Fisher Love These 5 Stocks
Published on May 14, 2024 at 8:56 am by FAHAD SALEEM in Hedge Funds, News
3. NVIDIA Corp (NASDAQ:NVDA)
Ken Fisherâs Stake: $8,252,596,105
Cramer has been reiterating his bullish take on NVIDIA Corp (NASDAQ:NVDA), albeit with a rather dampened mood and enthusiasm. Recently, Cramer said that he still believes NVIDIA Corp (NASDAQ:NVDA) is a stock to hold, not trade.
Todmohr
3 days ago
NVDA⌠I was working for a brokerage house on October 19th, 1987 - so Iâve been around a long time too, and seen and witnessed a lot of market crises.
Iâve learned many things - one of which is this: trying to guess what markets are going to do in response to any big macro- event is virtually impossible. All one has to do is look at the March 2020 Covid-driven equity market swoon (10k down Dow points in 1-2 weeks), only to see all time record highs in equities within about a year from then - all in the midst of the peak of the pandemic. Nobody I know (including me) - if they are honest - expected that.
Regarding NVDA: in my view, like many of the massive growth stocks of the last three decades, normal 1-2 year p/e applications simply donât work or apply. For years I kicked and screamed about stocks that traded like NVDA (NFLX AMZN TSLA CMG, just to name a few). They traded at 50-100 p/eâs for years, and in many/most cases still do. And while I stated they were going to crash and were highly overpriced based on my dinosaur-like thinking, they all doubled and tripled, then doubled and tripled again. The point here: markets were discounting these mega growth stocks out 5/10/15 years - not 1-2.
Learning and accepting that I was not smarter than the market, was one of my other best lessons - and has led me to being a a much more successful (financially speaking) investor. In other words, I learned and adapted/changed. I became willing to pay attention to what the market was telling me - even if I thought it was wrong.
What happens to NVDA in next weekâs report is irrelevant to me in the longer term, as imo we are in the 2nd or 3rd inning of AI innovation (not unlike where we were with the cloud 10 plus years ago). I fully expect NVDA to double and triple from here in the coming 2-5 years, and very possibly to do that again in the ensuing 10-15 years.
The late, great investor and founder of Investor Business Daily, Bill OâNeill, sums up these investing scenarios very succinctly and accurately imo:
O'Neil Quotes. The moral of the story is: never argue with the market. Your health and peace of mind are always more important than any stock. Be completely objective and recognize what the marketplace is telling you, rather than trying to prove that what you said or did yesterday or six weeks ago was right.
Respectfully and jmo.
Jetmek_03052
4 days ago
At roughly 76, yes, the valuation of NVDA is high, but it is decreasing every reporting quarter. It's decreased almost 23% in the last 12 months. Depending on how high the stock price climbs (if it does), the PE will likely continue to decrease, as much higher earnings are announced for the next several quarters.
Yes, we are all aware of the dire straights the economy and the banking system is in. Yes, it could all blow up in our faces at any time. Yes, it WILL eventually happen at some point. Yes, one should not throw cautions to the wind. But I will continue to ride the horse until it bucks me off.
Good luck to you also.
cadillacdave
4 days ago
Your concerns are valid.
The recent developments with inflation, the Fed, dollar, etc., are purposeful.
Those in charge at the moment are part of the "build back better" philosophy. However, in order to build back better, whatever is in place must be torn down first. That is the process we are witnessing.
Dallas-Cowboys
4 days ago
Analysts overhaul Nvidia stock price targets ahead of earnings
The chipmaker's new GB200 platform could transform its medium-term revenue growth, according to Wall Street analysts.
Nvidia shares edged higher in early Monday trading after a pair of analysts issued big price target changes on the AI tech giant ahead of its highly anticipated first-quarter-earnings report on May 22.
Nvidia (NVDA)  have surged more than 86% this year, adding more than $1 trillion in market value, as investors continue to reset earnings and revenue forecasts tied to its dominant position in the market for artificial intelligence-powering processors.Â
The latest iteration of those processors, a new GPU architecture known as Blackwell, was released earlier this spring, with a promise to perform AI tasks at more than twice the speed of Nvidia's current Hopper chips while using less energy and providing more bespoke flexibility.
âBlackwellâs not a chip; itâs the name of a platform,â CEO Jensen Huang told investors during the launch event. "Hopper is fantastic, but we need bigger GPUs."
HSBC analyst Frank Lee, in fact, cited the group's ability to leverage pricing power through the new GB200 platform as he lifted his price target on Nvidia by $300 to $1,350 a share.
GB200 platform pricingÂ
Lee sees the overall GB200 pricing in the region of $60,000 to $70,000 per server, twice the $30,000 to $35,000 cost of a stand-alone B100 processor.Â
Lee sees the server-rack pricing potentially helping revenue for Nvidia's next fiscal year, which ends in January 2026, rise to $196 billion, a 38% premium to current Wall Street estimates.Â
âWe believe Nvidia will continue to demonstrate its strong pricing power via its NVL36/NVL72 server-rack system and GB200 platform, which will once again surprise the market on the upside in FY26," Lee said in a note published on May 12.
Related: Nvidia shares get boost from key supplier ahead of earnings
Jefferies analyst Blayne Curtis, meanwhile, added $420 to his Nvidia price target, taking it to $1,200 per share, saying that he expects a a strong ramp for the GB200 NVL 36/72," which includes both Nvidia and Arm Holdings-based CPUs.
Nvidia earnings on deck
âWe believe itâs too early to sift out winners and losers in the AI basket yet, but Nvidia is our favorite,â said Curtis, who carries a 'buy' rating on Nvidia stock.
âNvidia maintains control over the entire ecosystem and is taking more pieces of the pie," he added.
Nvidia is scheduled to post fiscal 2025 first-quarter earnings after the close of trading on May 22, with analysts on average estimating profit rose more than fivefold from a year earlier to $5.55 a share.
Related: Analyst adjusts Nvidia stock price target ahead of earnings
The Santa Clara, Calif., group is also expected report revenue more than tripled, to $24.5 billion, with quarterly sales expected to top the $30 billion mark by the end of its current financial year in January 2025.
More AI Stocks:
Analyst unveils eye-popping Palantir stock price target after Oracle deal
Veteran analyst delivers blunt warning about Nvidia's stock
Analysts revamp Microsoft stock price target amid OpenAI reports
Nvidia shares were marked 0.95% higher in premarket trading to indicate an opening bell price of $907.42 each. The stock hit an all-time high of $974 on March 25.
rolvram
4 days ago
Nvidia Stock Analysis: Why Betting Against Overachieving NVDA Is a Foolâs Errand
May 13, 202406:00 EDT
NVDA
+1.27%
Amazingly, there are still bearish holdouts who, despite all of the available evidence, continue to bet against Nvidia
NVDA
. The opportunity to generate revenue from artificial intelligence compatible processors isnât just a fad. Nvidia stock gets an âAâ grade for advancing AI hardware technology in 2024.
Nvidia has an earnings report and conference call coming up on May 22. This will be an exciting event, but you donât have to wait until May 22 to start a share position in Nvidia. After all, you can pick any day in May to invest in an overachiever like Nvidia.
This Is a Positive Sign for Nvidia
How strong is the demand for AI-enabled hardware? Hereâs a news item that should help to answer this question. According to Reuters, South Korea-based SK Hynix disclosed that its âhigh-bandwidth memory chips used in AI chipsets were sold out for this year and almost sold out for 2025.â
This is relevant because SK Hynix is a supplier to Nvidia. Furthermore, these HBM chips are selling like hot cakes âas businesses aggressively expand artificial intelligence services.â
Reuters also mentioned that Nvidia commands around 80% of the AI-chip market. Thatâs astonishing, if you really think about it. And clearly, itâs a great market for Nvidia to be involved with.
When a major supplier like SK Hynix has products that are flying off the shelves (figuratively speaking), itâs hard not to be long-term bullish about Nvidia stock.
Preparing for a âNew Eraâ With Nvidia
Nvidiaâs AI conference for developers, known as GTC, took place recently and Nvidia didnât disappoint eager tech-product aficionados. At the GTC event, Nvidia unveiled its cutting-edge Blackwell graphics processing unit architecture.
The company expects Blackwell to âpower a new era of computing.â Nvidia CEO Jensen Huang declared that Blackwell is the âengine to powerâ the ânew industrial revolutionâ of generative AI.
This isnât empty boasting. Per TheStreet, Nvidia stated that Blackwell will âenable organizations to build and run real-time generative AI on trillion-parameter large language models.â
Plus, the company claims that Blackwell will achieve this âat up to 25 times less cost and energy consumption than its predecessor.â
With the new Blackwell architecture coming down the pipeline, Nvidiaâs already ultrapowerful H100 chips could soon be yesterdayâs news. Itâs another example of Nvidia topping itself, since evidently no competitor can top Nvidia.
Be an Overachiever Investor With Nvidia Stock
If you can be any type of investor, why not be an overachiever investor? Itâs entirely possible if you stick to overachieving companies like Nvidia. As weâve seen, the demand for AI-compatible processors is intense â and Nvidia is stepping up to the plate with top-tier products.
Blackwell will be Nvidiaâs latest game changer in the AI-hardware category. After that, weâll all just have to wait and see what amazing products Nvidia unveils next.
So, thereâs no wait for Nvidiaâs upcoming earnings event to get involved. Investors should conduct their due diligence and take action when theyâre ready to do so, and Nvidia stock absolutely deserves a confident âAâ grade .
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
rolvram
4 days ago
04:09 AM EDT, 05/13/2024 (MT Newswires) -- Nvidia (NVDA) said Monday it will use its open-source CUDA-Q platform to power quantum processing units at national supercomputing centers in Germany, Japan and Poland.
Germany's Julich Supercomputing Center is installing a quantum processing unit that uses Nvidia's GH200 Grace Hopper chip for chemical simulations and other uses.
Japan's National Institute of Advanced Industrial Science and Technology's ABCI-Q supercomputer is also using Nvidia Hopper architecture to research applications in AI, energy and biology, the company said.
Poland's Poznan Supercomputing and Networking Center recently installed two photonic quantum processing units connected to a new partition powered by Nvidia's Hopper for use in applications that include biology, chemistry and machine learning.
Nvidia also said Monday that nine new supercomputers worldwide are using its Grace Hopper chips for processing power, including new supercomputers coming online in Illinois, Texas, France, Poland, Switzerland, Germany and Japan.
rolvram
4 days ago
NVIDIA Grace Hopper Ignites New Era of AI Supercomputing
NVDA | 4 hours ago
From Climate and Weather to Scientific Exploration, Switzerlandâs Alps Supercomputer, Franceâs EXA1-HE Supercomputer and Others to Deliver 200 Exaflops of AI for Groundbreaking Research Using Energy-Efficient Grace-Based Systems
HAMBURG, Germany, May 12, 2024 (GLOBE NEWSWIRE) -- ISCâDriving a fundamental shift in the high-performance computing industry toward AI-powered systems, NVIDIA today announced nine new supercomputers worldwide are using NVIDIA Grace Hopper™ Superchips to speed scientific research and discovery. Combined, the systems deliver 200 exaflops, or 200 quintillion calculations per second, of energy-efficient AI processing power.
New Grace Hopper-based supercomputers coming online include EXA1-HE, in France, from CEA and Eviden; Helios at Academic Computer Centre Cyfronet, in Poland, from Hewlett Packard Enterprise (HPE); Alps at the Swiss National Supercomputing Centre, from HPE; JUPITER at the JĂźlich Supercomputing Centre, in Germany; DeltaAI at the National Center for Supercomputing Applications at the University of Illinois Urbana-Champaign; and Miyabi at Japanâs Joint Center for Advanced High Performance Computing â established between the Center for Computational Sciences at the University of Tsukuba and the Information Technology Center at the University of Tokyo.
CEA, the French Alternative Energies and Atomic Energy Commission, and Eviden, an Atos Group company, in April announced the delivery of the EXA1-HE supercomputer, based on Evidenâs BullSequana XH3000 technology. The BullSequana XH3000 architecture offers a new, patented warm-water cooling system, while the EXA1-HE is equipped with 477 compute nodes based on Grace Hopper.
âAI is accelerating research into climate change, speeding drug discovery and leading to breakthroughs in dozens of other fields,â said Ian Buck, vice president of hyperscale and HPC at NVIDIA. âNVIDIA Grace Hopper-powered systems are becoming an essential part of HPC for their ability to transform industries while driving better energy efficiency.â
In addition, Isambard-AI and Isambard 3 from the University of Bristol in the U.K. and systems at the Los Alamos National Laboratory and the Texas Advanced Computing Center in the U.S. join a growing wave of NVIDIA Arm-based supercomputers using Grace CPU Superchips and the Grace Hopper platform.
Sovereign AI
The drive to construct new, more efficient, AI-based supercomputers is accelerating as countries around the world recognize the strategic and cultural importance of sovereign AI â investing in domestically owned and hosted data, infrastructure and workforces to foster innovation.
Bringing together the Arm-based NVIDIA Grace CPU and NVIDIA Hopper™ GPU architectures using NVIDIA NVLink®-C2C interconnect technology, GH200 serves as the engine behind scientific supercomputing centers across the globe. Many centers are planning to go from system installation to real science in months instead of years.
Isambard-AI phase one consists of an HPE Cray EX2500 supercomputer with 168 NVIDIA GH200 Superchips, making it one of the most efficient supercomputers ever built. When the remaining 5,280 NVIDIA Grace Hopper Superchips arrive at the University of Bristolâs National Composites Centre this summer, it will increase performance by about 32x.
âIsambard-AI positions the U.K. as a global leader in AI, and will help foster open science innovation both domestically and internationally,â said Simon McIntosh-Smith, professor of high-performance computing at the University of Bristol. âWorking with NVIDIA, we delivered phase one of the project in record time, and when completed this summer will see a massive jump in performance to advance data analytics, drug discovery, climate research and many more areas.â
Accelerating Scientific Discovery
NVIDIAâs accelerated computing platform comprises NVIDIA Hopper architecture-based GPUs, NVIDIA Grace CPU Superchips, NVIDIA Grace Hopper Superchips, NVIDIA Quantum-2 InfiniBand networking and a full suite of NVIDIA AI and HPC software.
rolvram
4 days ago
Nvidia rivals gold as shield against inflation, survey shows
THE biggest US tech stocks are not only a bet on innovation but also a possible hedge against inflation, according to some respondents in the latest Bloomberg Markets Live (MLIV) Pulse survey.
Gold, the haven of choice for decades, is still seen as the best safeguard against the risk of rising prices, according to 46 per cent of survey participants. But nearly a third said the tech behemoths are their first pick for the role.
rolvram
4 days ago
Why this stock picker only recently bought NVIDIA (and why he's never owned Tesla)
In this episode of The Pitch, concentration is the game and working out the winners among the leaders is the challenge.
Hans Lee
Livewire Markets
There are market darlings, and then there is NVIDIA (NASDAQ: NVDA). The company, which designs chips for powering graphics and high-performance computing, is widely considered to be the company that will have the first and largest advantage in harnessing the artificial intelligence (AI) mega-trend. Its stock price is up over 70% year-to-date and in the past 12 months, it's up well over 190%.
If you've tried to bet against this stock either through deliberate shorting or just not owning it, it's been a very painful ride.
It's certainly been like that for Chris Smith and his team at Intermede Investment Partners. Intermede's portfolio, which has owned most of the Magnificent Seven for a long time, prides itself on finding high-quality global companies that can deliver consistent, double-digit earnings growth. But they never owned NVIDIA until two months ago.
So naturally, the question begs - Why?
"The more we thought about it, the more we felt comfortable with the fact that this is just more than a hardware company making a fast chip. There is a whole ecosystem around that and barriers to entry are quite high," Smith said before adding:
"We had been behind the curve on estimating the potential for this business and we decided to go with our upside case rather than our base case."
In this edition of The Pitch, Smith shares his thoughts on the Magnificent Seven and stock market concentration more generally. He also gives his views on some of the fund's portfolio holdings and recent earnings. Finally, he shares his thoughts on the two Mag7 companies they don't own - Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA).
EDITED TRANSCRIPT
Does all this concentration (and the hype around these stocks) worry you?
It is a different era, I would say. The Magnificent Seven are making up a larger and larger portion of the market. When we started 10 years ago, there wasn't a security in the market that was more than 2% of the benchmark. Now, we have several that are close to 5%. It has changed the way we manage the portfolio to some extent.
I think when you look at that Magnificent Seven group, most of them are delivering. It is justified by the moves that they've had in stock price. You have earnings growth growing mid-teens or better for most of them. Some are growing well into the 20's. You have revenue growth well into double digits for most of them.
You have multiples on some of these stocks that are below market average, less than 20 times on Meta (NASDAQ: META), and less than 20 times on Alphabet (NASDAQ: GOOGL). There's still pretty good value across the space. We do invest in quite a number of them.
Does this new paradigm you speak of change the way you perceive them as investment opportunities?
It does make it very critical that you have a view of all of these companies. Certainly missing out on one of them that's doing quite well can be very painful as a manager. There are a couple of examples that we might talk about. Nvidia (NASDAQ: NVDA) is one of them, that we didn't have last year. You do have to be very aware of these key names, and you have to have a view.
What has been the most interesting takeaway from earnings season so far?
I think the tech earnings have been interesting. You've seen revenue growth going quite well. You've seen it increasing contribution from AI. There's a lot of concern about all this capital going in. What kind of contribution are we getting? I think Microsoft (NASDAQ: MSFT) demonstrated that a lot of their Azure growth is coming from AI. They're seeing a good boost from that.
Amazon (NASDAQ: AMZN) as well as seeing some good uptick from AI. You saw an increase in AWS growth, the cloud part of the business, that they just reported very recently. That's partly driven by AI. I think it's pretty amazing. But you've seen CAPEX budgets that are already expected to be growing very significantly this year were pushed even higher for some of the big companies like Microsoft and Alphabet. More than 50% growth year over year, coming off already quite high levels. A lot of that is going to AI and that's the sort of thing we've been following.
Meta (NASDAQ: META) was the one that was viewed as a disappointment. They have been having this year of efficiency that's given them a lot of benefits. You saw a lot of margin expansion. Now, they're investing again, this time in AI. Hopefully, that turns out into something. It is a name that we have in the portfolio.
You only just bought NVIDIA in the last couple of months. Why did you buy it now?
It is a bit painful to buy a stock that's up that much, no question about that. But the more we thought about it, the more we felt comfortable with the fact that it's more than just a hardware company making a fast chip at the moment. There's a whole ecosystem around that. Barriers to entry in this space we think are quite high. The growth can be sustained given we've seen CAPEX budgets being increased on top of increases from a couple of months ago. That money is flowing to NVIDIA.
We had been behind the curve, I would say, on estimating the potential for this business. We decided to go with our upside case on the stock rather than our base case. On that basis, we had a 20% plus upside, which is what we look for to enter a name. We are still below benchmark weight, so we are being a little bit conservative on that. But it is one of our favourite names in the sector. We felt we couldn't keep betting against it, and effectively being short the stock.