Many, many years ago, when memories of the last Ice Age were still fresh I was the editor of the IC Stockmarket Letter, the share tipping arm of the Investors Chronicle. It doesn’t exist any more, no doubt because they could not find anyone of my genius to carry on the tradition when I left or for some other reason.
My predecessor as editor, had subscribed to a share alerting service which every week sent a number of share charts through the post. I liked to receive them but to my way of thinking they were not alerts, they were just charts.
When I had the idea for Quentinvest as effectively the wholly on-line successor to Quantum Leap and Chart Breakout part of my thinking was to use the flexibility of the Internet to create the alerting service that I wanted but did not get from these weekly share charts.
This concept is still at the heart of QV; that every month subscribers should be alerted to shares that for chart, fundamental, something new or a bit of everything reasons look ripe for action. Subscribers can then use this information to trade, invest, go Kamikaze, build their portfolio or whatever.
The US stock market has been difficult since the summer. Many companies are doing well and AI in its various iterations looks potentially incredibly exciting. Against that bond yields have been rising and as previously noted higher bond yields are kryptonite, especially for high growth super stocks.
This has left me wavering between macro looks terrible and nearly all my benchmarks are heading lower and micro where many individual stocks look super exciting.
History suggests that buy and hold works very well with really exciting companies. There can be scary short term volatility but in the end if the fundamentals and the story are good enough the shares will go higher, potentially much higher.
Let us have a look at what is surely one of the most exciting stocks, not just in this stock market but of all time.
Table of Contents
Now this could be read as a bearish chart with a dead cross on the moving averages. Many charts, indeed the overwhelming majority on my benchmarks list, look like this; hence my nervousness about the overall stock market.
But now let us look at a much longer term chart, based on 6 monthly candlesticks instead of 1 monthly.
The message suddenly is completely different. This chart looks bullish although being so long term prices can move sharply either way in the short term without changing the chart message. What does stand out is that Nvidia shares are in a strong uptrend and have recently given a buy signal.
There have only been five such buy signals in a quarter of a century so such signals must command our interest. Especially when set against the background of the staggering growth being reported by Nvidia in recent quarters and the electrifying story.
Here is the conclusion of one recent analyst.
Despite potential short-term volatility, I anticipate Nvidia to achieve a 28.4pc annualized return until 2030, with the stock reaching nearly $1,200.Millennial Dividends, 1 November 2023
So what is going on? Part of the answer is a massive shift from gaming to data centres.
In Q2 FY22, Nvidia’s gaming sector constituted 47pc of its revenue. Fast forward two years to Q2 FY24, and the gaming business now accounts for less than 18.4pc.
This shift becomes crucial in light of the gaming market’s projected CAGR of 13.4pc until 2030. However, the more lucrative data center market, especially focusing on AI, IoT, and Big Data, is anticipated to grow at a CAGR of 20.7pc until 2030.
Given Nvidia’s position as a leader in the accelerated computing platform, empowering modern data centres with the capability to accelerate deep learning, machine learning, and high-performance computing workloads through products such as DGX Systems, HGX A100, EGX Platform, and vGPU solutions, it is anticipated that Nvidia will continue to maintain its dominance and experience even faster growth.Millennial Dividends, 1 November 2023
For such a large company it is staggering what is happening.
Considering these factors, it’s evident why Nvidia anticipates its momentum to persist in FY24. The company has projected Q3 revenue to hover around $16bn, indicating a remarkable 169pc growth from the same period last year, primarily propelled by the flourishing data center segment.Millennial Dividends, 1 November 2023
This analyst comes to the following conclusion.
Many skeptics argue that AI is just another hype and that the lofty valuations of tech giants will plummet once the excitement fades.
However, I don’t share that viewpoint.
Consider the tremendous boost in productivity computers provided over the past two decades. I believe AI is a similar catalyst that will usher in a new era of productivity throughout the 2020s and 2030s.
Nvidia stands at the forefront of this transformation, poised to seize the opportunity by providing essential infrastructure for AI solutions through its industry-leading data centre products.
Despite what might appear as a high valuation, Nvidia is trading at a discount compared to its 5-year forward metrics.
With its unique market position and promising growth trajectory, I am confident that Nvidia Corporation can deliver annualized returns of 28.4pc over the next 7 years.Millennial Dividends, 1 November 2023
Nvidia has a 12-Month Price Target of $623
Here is another interesting comment on Nvidia.
According to 44 analysts who cover the stock, NVIDIA has a 12-month median price target of $623, which indicates a 42pc jump from current levels. The company’s strong outlook through next year, coupled with the disappointing earnings and delayed chip production of its competitors, suggest that it will remain the dominant producer of the high-powered chips needed to build and run large AI models for the foreseeable future.
In addition, the dynamic and rapidly evolving nature of AI and its broad applicability across industries means that the enthusiasm and funding for this transformative technology isn’t going away any time soon. As such, the potential of AI to revolutionize various aspects of our lives is only set to increase.
Because NVIDIA recognizes this, it has shaped its long-term vision to ensure that they are well-prepared to meet evolving market demands. It wouldn’t be surprising if NVIDIA delivers even better results next fiscal year. In 2024, the company expects to at least triple its shipments of H100 processors, and The Financial Times estimates that number could actually be up to 2m units. While some investors worry the uptick from AI has already peaked, NVIDIA knows it has only just begun.Market Beat, 6 November 2023
Strategy – Hot Stocks Simmering Nicely
The amazing thing about AI is just where it might be going. I write – a lot. In addition to copy for Quentinvest, I write emails etc., and also books. So far I have written 15 books, none published and I love writing and also creating audible books. One of my tech-savvy sons-in-law has suggested as a present for me putting all my written and spoken material into an AI personal assistant which will then help and copy me and keep learning. I hope she is female and beautiful.
If today’s large language models are capable of some amount of reasoning, however elementary, it could yield what could be years of rapid advances in the abilities of generative AIs.
In part, that’s because language isn’t just another medium of communication, like pictures or sound. It’s a technology humans developed for describing absolutely everything in the world we can conceive of, and how it all relates. Language gives us the ability to build models of the world, even absent any other stimuli, like vision or hearing, says Aguera y Arcas. That is why a large language model can write fluently about the relationship between, say, two colors, even though it has never “seen” either of them, he says.
In addition, language is the interface for countless other systems on the internet that were designed for use by humans, but which can be repurposed by these generative AIs — such as search engines.
The synthesis of all of these observations about large language models is that, for example, we might soon have AI-based assistants that are completely personalized to data specific to us. Google is already attempting a first version of this — an update to its Bard generative AI allows it to search and synthesize across all of your emails, calendar items and documents, as long as they are already in Google’s system — but it’s primitive and prone to error.
In the not-too-distant future, such systems might be better able to refashion themselves when fed our personal data, in a way that is analogous to how humans continuously form new memories, says Aguera y Arcas. Within, say, two to five years, this could make future AI assistants much better at personalizing their responses to every one of us.Dow Jones Newswires, 22 October 2023
Many Transformative Inventions Ahead
This could all become insane for our our children and grandchildren.
Between the invention of the steam engine and the debut of the locomotive, more than a century elapsed. Meanwhile, a new science was born, which in turn became the midwife of countless other advancements essential to the Industrial Revolution. If the development of generative AIs conforms to this pattern at all, its near future will include transformative inventions — AIs expert in different subjects, truly personal assistants — followed by years of refinement, mad scrambles to harness and benefit from these new technologies, and possibly another sort of Industrial Revolution. But rather than a revolution predicated on energy and matter, this one will be based on the manipulation of data and insight.
We can only begin to imagine what that will look like.Dow Jones Newswires, 22 October 2023
Nvidia. NVDA. Buy @ $459