Brokemillwright
7 hours ago
Artificial intelligence, which a few years ago existed only in science fiction (check out William Gibson’s Neuromancer), has morphed into an epic stock bubble. Nvidia, maker of the leading AI microchips, saw its market cap surge from $200 billion in 2019 to $2 trillion in 2023. I haven’t actually checked, but that might be the fastest episode of paper wealth creation in human history.
So it’s possible that this sector got … ahem … a little ahead of itself. And last week it corrected brutally.
Wolf Richer just posted some charts showing how bad — and widespread — the damage was. Here’s the AI part of his article:
Nvidia [NVDA] plunged 10% today, to $762.00, the worst one-day plunge since March 2020. It’s down 21.8% from its all-time high of $974 on March 25. It became infamous here in this joint on February 24, when we honored it with a WTF Chart of the Year. At that time, Nvidia’s market cap had spiked to nearly $2 trillion, and shares to $788.
We compared it to our WTF-Charts-of-the-Year of Tesla, which a couple of years later made it into our pantheon of Imploded Stocks, though its business continued to boom, and its Model Y became the bestselling model in the world. It just meant that the mania had begun to seep out of the stock.
The minimum qualification for making it into the pantheon: the stock has to drop at least 70% from the all-time high. For NVDA to be inducted into the pantheon, the stock would have to drop to $292, and that’s not hard, that’s where it had been only 10 months ago. It was already a very high-priced stock back then. So today, we’ll honor it with a new and improved WTF chart of the year.
rolvram
2 days ago
Is Nvidia the Next $6 Trillion Tech Giant? Legendary Investor Sees Massive Upside Potential.
Nvidia shareholders should be happy employees just got some move Nvidia stock
19h ago · By Will Ashworth, InvestorPlace Contributor
Nvidia (NVDA) might be the leader in AI, but it’s also brilliant about rewarding employees with more Nvidia stock.
All stakeholders win if it gets to $6 trillion.
It shouldn’t be challenging for Nvidia to recruit top talent in the years ahead.
Is This Elon Musk’s Favorite A.I. Stock?
Nvidia stock - Is Nvidia the Next $6 Trillion Tech Giant? Legendary Investor Sees Massive Upside Potential.
Source: Ascannio / Shutterstock.com
Nvidia stock (NASDAQ:NVDA) has been one of my favorite companies for some time despite the fact that I’m not a techie. The company’s recent move to reward employees with additional Nvidia stock is one more example of why CEO and co-founder Jensen Huang is one of America’s finest leaders.
On April 1, Nvidia stock started its annual employee performance reviews. In those meetings, employees were notified that they would receive a “Jensen special grant,” a 25% boost in (RSUs) restricted stock units given to employees when they joined the company.
Discover one tiny Maryland company poised to be the next Nvidia
The RSUs will vest over 24 quarters, with the first bunch (6.25%) issued in September. The company is said to be doing this to ensure employees benefit even if its share price falls in the years ahead.
If this doesn’t tell you what kind of leader Huang is, nothing will. It’s one more reason to own the company over the long haul.
Here’s why.
A $6 Trillion Company?
Retired Wharton professor Jeremy Siegel, best known for his book Stocks for the Long Run, recently provided some commentary about Nvidia as a Senior Economist for WisdomTree (NYSE:WT).
In his March 11 commentary, Siegel suggested that NVDA stock could be worth as much as $6 trillion in the future, given its status as a momentum investment.
“The big question for Nvidia, and tech more broadly, is: are we in a 1996-97-like hype cycle where these stocks are still going to get even crazier as we did 24 years ago during the internet mania? There’s no way to answer that question now,” Siegel wrote.
“There could be 2-3x more upside in Nvidia if it follows Cisco’s valuation path to its peak. To be clear—this is not my prediction of what will happen—just to note as to what is possible in a mega bubble.”
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He says that in 2000, tech stocks were trading at 60x earnings. They’re about half that today, so an ongoing boom is more likely than a bust.
Talent Recruitment Should Remain High
Jensen Huang is smart. He knows that to continue reaping the rewards of a big bet on AI, B+Nvidia needs to continue recruiting top engineers and other talented tech people to keep the bus moving forward.
This 25% boost is akin to companies that become known for their special dividends. One special dividend might not attract the attention of most investors, but two or three in short order surely would.
The same applies to Nvidia’s Jensen special grant. The news of this extra benefit might get people’s attention for a few days or weeks, but the spotlight will fade. However, if it gives a second Jensen special grant in 2025, the word will get around that Nvidia’s the place to be if you want to be handsomely compensated for hard work.
Discover one tiny Maryland company poised to be the next Nvidia
As a result of Nvidia’s success, Jensen Huang is now the 20th wealthiest person in the world, with a net worth of $74.1 billion. It’s up by $30.1 billion in 2024 alone. His jump in wealth in 2024 is the second-highest, bested only by Mark Zuckerberg.
I have a friend who is quite wealthy and owns his own business. He didn’t want to rub it in with employees, so he drove to work in a beat-up Jeep, leaving his BMW at home to enjoy after work.
While not entirely the same idea, I’m sure Huang knows his good fortune and why it makes sense to spread it around. That’s Leadership 101.
In the Right Place at the Right Time?
Ultimately, while Huang has always been willing to make big bets on the future, he’s been able to execute these bets because of his employees. No leader of quality doesn’t believe this. It’s the only way to get from A to B successfully. To say that he’s enlightened would be an understatement.
“In the beginning, Nvidia sold these G.P.U.s to video gamers, but in 2006 Huang began marketing them to the supercomputing community as well. Then, in 2013, on the basis of promising research from the academic computer-science community, Huang bet Nvidia’s future on artificial intelligence,” The New Yorker’s Stephen Witt wrote in November 2023.
Discover one tiny Maryland company poised to be the next Nvidia
A decade later, Nvidia stock and its shareholders benefited greatly from his patient bet on AI.
There is no question this has little to do with luck but a passion for finding uses for microchips that will define tech’s future.
“I do everything I can not to go out of business,” Huang told Witt at Denny’s, where the CEO once worked as a dishwasher. “I do everything I can not to fail.”
What’s not to like?
rolvram
3 days ago
Investing.com - Nvidia (NASDAQ:NVDA) and Super Micro Computer (NASDAQ:SMCI) have been among the main beneficiaries from the boom in AI interest, but they should retain a heavy weighting in individual portfolios for some time to come, according to legendary investor Louis Navellier
At 11:05 ET (15:05 GMT), Nvidia stock traded around 2% lower and Super Micro down over 10%, as investors took profits after stellar gains, with the former up 75% year to date and the latter over 200% higher.
“I know some people like to take profits, and that's fine, but for the bulk of our portfolios, we're going to be holding these stocks for a long, long time, said Navellier, chairman and founder of Navellier&Associates, which manages approximately $1.0 billion in assets, in a note.
Essentially, the speed of Nvidia’s AI chips is expected to double every year, and by the end of the decade, Nvidia’s AI processing speed is expected to be 11,800% higher than today.
Additionally, Nvidia launched a cloud service for researchers to test out their quantum-computing software. The Nvidia Quantum (NASDAQ:QMCO) QMCO Cloud will first comprise a data center stacked with AI chips and systems that together simulate a quantum computer.
rolvram
3 days ago
Nvidia Stock Looks Too Cheap Here - Put Premiums are Very High and Worth Shorting
Mark R. Hake, CFA - Barchart - Sun Apr 21, 12:39PM CDT
Nvidia Inc. (NVDA) stock has taken a tumble since the end of March but it looks too cheap now. Moreover, its put premiums are sky-high. This makes them worth shorting both for income and with low buy-in strike prices. That applies to out-of-the-money puts whose near-term premiums are at very high levels.
NVDA stock closed at $762 on Friday, April 12, 2024, down $188.02 or 19.8% since March 25 when it was at $950.02. Moreover, on Feb. 22, the day after it released earnings on Feb. 21, NVDA stock was at $785.38. However, that was up $110.66 or 16.4% from the day before earnings came out.
The point is that the market seems to think Nvidia will face harder times in its AI chip-designing business. The problem is that doesn't line up with analysts' revenue forecasts, and by inference, its free cash flow (FCF) estimates.
NVDA Stock Looks Cheap Here
I have discussed this in several Barchart articles such as this one on March 29, “Nvidia Stock Could Still Be Worth 26% More at $1,141 - Good for Short-Put Plays by NVDA Investors.” And before that I wrote this article on Feb. 25, “Nvidia Stock Could Be Worth 42% More at $1,120 - Put Short Sellers Find This Attractive.”
In these articles, I projected sales and free cash flow (FCF) for Nvidia for the next year or longer. Based on the company's massive 50% FCF margins, it's possible to project a significantly higher valuation for the stock.
For example, analysts project $111.56 billion in revenue for the year ending Jan. 2025 and $136.17 billion for next year. So, sometime in the next 12 months (NTM), Nvidia will be on an average revenue run rate of at least $123.87 billion.
Therefore, if Nvidia keeps making 50% FCF margins as it did last quarter, free cash flow will be at least $61.9 billion (i.e., 0.50 x $123.87 billion). Even if it averages just 45% FCF margins, FCF will rise to $55.7 billion, which is still over twice the $26.95 billion it made in FCF last year.
If the market values NVDA stock at a 2.5% FCF yield metric, which is the same as a 40x FCF multiple, the stock's value will be between $2,228 billion and $2,476 billion. This is estimated by multiplying the 45% and 50% FCF margin estimates (i.e., $55.7b and $61.9b) by 40. So, the average estimate for Nvidia's market cap over the next 12 months is $2.352 trillion and potentially as much as $2,476 billion.
That average value is still 23.66% higher than its existing $1.902 trillion market cap today with an upper value that is 30.1% higher. In other words, NVDA stock is worth at least $942 per share (i.e., 1.2366 x $762), and could be worth as much as $991 per share or more. And next year, that valuation could rise as well if the company continues to make higher revenue and FCF.
Shorting OTM Puts
Right now NVDA stock, having dropped so far and fast, has very high put option premiums. This makes them worth shorting both as an income play, especially for existing investors, and also as a good entry point for new NVDA stock buyers.
For example, look at the May 10 expiration period, which is 3 weeks away. It shows that the $725 strike price, which is almost 5% below the price on April 12, is trading for $21.10 per share. Moreover, even the $710 strike, which is over 6.8% below today's price, has a $16.65 premium on the bid side.
That means that any short sellers of these put options can make immediate yields of 2.91% (i.e., $21.10/$725.00) and 2.345% (i.e., $16.65/$710.00) over the next three weeks. These are very high yields and provide very good downside protection to the short sellers.
For example, even if the stock falls to $710 by May 10, the investor, who is obligated to use the cash that was secured to do the short sale, still has a profit, since their breakeven price would be $710-$16.65, or $693.35 per share. That represents an expected return (ER) of 2.40% before commissions (i.e., $710/$693.35-1).
And the $725 strike price investor knows that no matter what, even if the stock falls to the strike price, his breakeven price is $725-$21.10, or $$703.09. If the investor does not already own NVDA stock they may be happy to continue holding it here at this cheap buy-in price. That is because they can see that it could be worth substantially more over the next 12 months if the company keeps generating strong FCF margins.
Downside Risk
Nevertheless, even if NVDA keeps falling, possibly from strong competition concerns, the investor has ways to improve their situation. For one, look at this play. The investor could short the $725 strike price put option and buy the $710 put as a long investment. That means that, given that the breakeven for the short sale is $720.55 per share (-i.e., $725-$16.65+$21.10).
That leaves the investor exposed to just the width between $710 and $720.55 over the next 3 weeks. That may be deemed an acceptable risk, especially if NVDA rebounds, given its strong FCF. Moreover, by May 21 the company is likely to report its quarterly earnings, so they may not find it unacceptable to keep holding the shares that they were obligated to buy.
One technique to narrow this potential risk is to manage the long-term purchase. If the stock starts to rise, it makes sense to sell the puts as they lose value.
In addition, even if the puts are exercised at the $725 strike price, the investor can later sell out-of-the-money calls. For example, in last month's article, I recommended shorting the $880 puts for $25.50 expiring on April 19, for a breakeven buy-in price of $854.50. Those puts were likely exercised, and the investor now has an unrealized loss of $92.50, or -10.8%.
So now, they can sell call options at say $20.00 (see the May 10 call option expiry chain) for the $810 strike price. Even if those are exercised the net loss is just $830.00 (i.e., $810+$20.00) - $854.50, or -$25.54, which is now a loss of just 3.0% (i.e., $-25.54/$854.50). If this is repeated one more time in another 3 weeks, the investor can potentially recover that loss.
Moreover, if they continue to short OTM put options, the investor can lower their buy-in price and gain extra income. The bottom line is that NVDA stock looks very cheap here and shorting OTM puts is a good way to buy in at a low price and also gain income.
rolvram
3 days ago
NVIDIA To Collaborate With Japan On Their Cutting-Edge ABCI-Q Quantum Supercomputer
Muhammad Zuhair
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Apr 21, 2024 07:10 AM EDT
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NVIDIA To Collaborate With Japan On Their Cutting-Edge ABCI-Q Quantum Supercomputer 1
NVIDIA is all set to aid Japan in building the nation's hybrid quantum supercomputer, fueled by the immense power of its HPC & AI GPUs.
Japan To Rapidly Progressing In Quantum and AI Computing Segments Through Large-Scale Developments With The Help of NVIDIA's AI & HPC Infrastructure
Nikkei Asia reports that the National Institute of Advanced Industrial and Technology (AIST), Japan, is building a quantum supercomputer to excel in this particular segment for prospects. The new project is called ABCI-Q & will be entirely powered by NVIDIA's accelerated & quantum computing platforms, hinting towards high-performance and efficiency results out of the system. The Japanese supercomputer will be built in collaboration with Fujitsu as well.
RELATED STORY NVIDIA GeForce GTX 2070 GPU Engineering Sample Spotted: 2176 Cores Instead of 2304, Can Be Flashed With RTX 2070 vBIOS
Diving into what we can expect with Japan's ABCI-Q, NVIDIA stated in an earlier blog post that the firm plans to integrate its NVIDIA CUDA-Q platform into the system. This platform is an open-source resource that allows users to leverage quantum-classical applications. CUDA-Q will act as an integral part of the supercomputer, allowing the ease of integrating relevant CPUs and GPUs onboard. Moreover, Team Green plans to accommodate 2,000 of NVIDIA's H100 AI GPUs, which the latest NVIDIA Quantum-2 InfiniBand interconnects.
Researchers need high-performance simulation to tackle the most difficult problems in quantum computing. CUDA-Q and the NVIDIA H100 equip pioneers such as those at ABCI to make critical advances and speed the development of quantum-integrated supercomputing.
- Tim Costa, Director of HPC and Quantum Computing, NVIDIA
Japan's ABCI-Q supercomputer is a part of the country's technological innovation phase, where they plan on capitalizing on the benefits of current-gen technologies like quantum computing and AI to excel in mainstream consumer industries. A few months ago, NVIDIA's CEO Jensen Huang met Japan's President Fumio Kishida, and both of them talked about increasing collaboration across multiple sectors and providing a steady supply of AI equipment for Japan's needs. The unveiling of ABCI-Q is just a step ahead toward what seems like an extensive relationship between Japan and NVIDIA.
News Source: Nikkei Asia
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