Way back in the day when I was a hippy and a drug fiend one of the drugs that I experimented with was LSD. I developed this theory that each time you took LSD you entered a new reality, as though you were in a play where all the scenery and props had been changed.
Something similar happens in the stock market. Jensen Huang has gone from hero to zero almost literally overnight, for the general public at least and this has catapulted us into a new scene, a new syndrome. In this scene Nvidia shares are under severe pressure. The founding genius and the face of the company has gone, the AI revolution has lost its principal cheerleader and investors are fearful of more revelations to come. Nvidia may be in a bigger mess than has currently been revealed. The shares are taking a hammering.
But powerful positives remain. It is Nvidia, not Jensen Huang, which stands at the heart of the AI revolution. Its technology and intellectual property is amazing and it has grown huge on the back of these assets. It is not absurd to imagine the company generating between $750bn and $1 trillion of revenue annually in the present decade, enabling it to generate a tsunami of cash.
The visionary may have gone but great talent remains and there is likely to be a sharper focus on using the company’s assets, visible and invisible, to generate a rich stream of rewards for shareholders. If concrete steps are taken to realise such a new vision for the company that could be good for the shares.
Presently the chart looks terrible, but that is the thing about charts. They look terrible until they don’t. Periodically loose holders, investors along for the ride, need to be shaken out. Eventually the selling dries up, the price makes a new base and then it is off to the races again.
Steve Jobs was at least as important to Apple as Jensen Huang is to Nvidia yet the company weathered his untimely death at an early age from cancer. Nobody is indispensable. Look at the Roman Empire which flourished under the seemingly most catastrophic leaders. At one stage a horse became consul but the empire survived and thrived. Britain has been led by monkeys for decades but we are still here and Colette Kress, the newly appointed acting CEO of Nvidia, has been CFO since 2013 so she should be up to speed and as an administrator she could easily preside over all the hyper-geeks making the company successful.
Slightly worrying is Jensen’s Huang’s recent comment that Colette Kress is ‘like a deer in the headlights’. It would be alarming if it turned out that in its ambitions to steer the AI technology boom and keep up with events the company had become over stretched in some way. But in stockmarkets everything climbs a wall of worry and most often nothing s as bad as you think it might be.
Strategy – Buy On Bad News
Shares in the AI trade are taking a relentless hammering with colossal volumes of trading in Nvidia as investors dump the shares, but is it all over for the business, almost certainly not. The selling will dry up, the shares will stabilise and then start to recover. How low will they go. No idea, but they are already looking super cheap if there is any true in what Jensen Huang had been saying about the outlook prior to his departure.
My experience of AI is that it is amazing and becoming more amazing all the time. Humanity is on an incredible journey. Where it will all end, who knows , but most likely it has only just begun.
