Whither Nvidia?
Table of Contents
Quentinvest v Cramer – Let Battle be Joined
I find myself uncomfortable being on the opposite side of the fence from Jim Cramer.
Super Micro Computer Inc‘s SMCI stock behavior is another indicator of a “toppy” market, according to Cramer. The stock has doubled since the end of January and surged by over 18pc after being added to the S&P 500. Cramer labeled this behavior as “idiotic” and identified Super Micro Computer as the most overvalued stock in the market.
“Toppy action ends only when they get to everything and everyone — and that does include Nvidia, even as I can’t think of a reason for it to come down,” he said. “And that’s the real oddity— it doesn’t matter. When the market gets toppy, nobody needs a reason to knock down high-flying stocks.”
Benzinga, 6 March 2024
I am not the only one who doesn’t agree with him and so far I am winning the battle against his bearish analysis of ARM Holdings, which I think has huge potential.
Super Micro Computer Inc SMCI, Palo Alto Networks Inc PANW, and PepsiCo Inc PEP are the three stocks that wealth manager Brian Vendig the president of MJP Wealth Advisors has identified as potential investment opportunities.
What Happened: Vendig is optimistic about the stock market’s performance this year and has identified several investment opportunities outside of the 2023 market leaders, reported CNBC on Tuesday.
He believes that the expansionary earnings outlook for this year, combined with the market areas that did not significantly contribute to returns last year, such as healthcare, industrials, materials, financials, and consumer staples, offers potential for investors.
Vendig is keeping an eye on Super Micro Computer, a company that makes AI systems and graphics processing unit servers. The company’s shares have seen a significant rise, and it was recently added to the S&P 500.
Despite this, Vendig suggests that it may be wise to take some profits now and wait for a better entry point later in the year. “I think it’s something that is part of a greater trend that’s happening in the market place, because investors are thinking this is a once-in-a-lifetime opportunity to invest in AI,” he said.
He also sees potential in Palo Alto Networks, a cybersecurity company that recently announced changes to its software services. Although this may impact short-term revenue, Vendig believes it could lead to long-term benefits.
Finally, Vendig has identified PepsiCo as a value stock with strong fundamentals and pricing power, despite recent challenges. Recently, the company has faced pressure due to concerns about reduced demand for its snacks, coinciding with increased focus on weight-loss medications and healthier lifestyles.
Why It Matters: Super Micro Computer will be joining the S&P 500 Index on March 18, a move that is seen as a significant endorsement of its AI technology. This development, along with its strong performance, has drawn the attention of analysts and investors.
Meanwhile, Palo Alto Networks has been attracting attention from high-profile investors, including former Speaker of the House Nancy Pelosi, who recently disclosed significant investments in the company. This, combined with the company’s strategic changes, has positioned it as a key player in the cybersecurity sector.
Despite recent challenges, PepsiCo has been making strategic moves to expand its health and wellness offerings, a move that Vendig believes will support future growth. This, combined with the company’s strong fundamentals, has kept it on the radar of analysts and investors.
Benzinga, 6 March, 2024
As seen above the Nvidia chart looks super strong and compatible with a continuing uptrend to much higher levels. The fundamentals remain stunning.
Investors may already be looking ahead to Nvidia’s AI conference later this month — beginning on March 18 — as the next potential catalyst for the shares.
“Given the role AI has played in driving the sector’s recent gains, we continue to believe events like [these] could serve as meaningful catalysts (and we point to Nvidia’s short-term volatility term structure as supportive of the idea that investors are focused on that AI event,” said Susquehanna analyst Christopher Jacobson.
Dow Jones Newswires, 6 March 2024
I found this useful explanatory quote.
Nvidia is having a moment over its graphics processing units, or GPUs — hot commodities that are essential in creating AI systems such as ChatGPT. But what exactly are GPUs?
Unlike the circuitry on standard computer chips, which handle one computation at a time, in what is called serial processing, GPUs handle much more complex tasks by making many calculations at the same time, an approach known as parallel processing. Originally designed to make videogames run better, GPUs started to be widely used in AI around 2012.
“They are able to do more computations per unit of energy consumed by being able to incorporate huge numbers of smaller and smaller transistors,” said Hanna Dohmen, research analyst at Georgetown University’s Center for Security and Emerging Technology.
Tech companies working on those systems, including Meta Platforms and Microsoft, are shelling out for them, pushing the revenue of Nvidia to unprecedented heights. The company recently said it expected around $24 billion in sales in its current quarter, which would be a record for the company and more than three times the amount for the same period a year earlier.
Dow Jones Newswires, 6 March 2024
2012 – the Dawn of the Age of AI
What is also significant is the date, 2012, when GPUs became widely used in AI because that also looks like the date when the great semiconductor bull market began. You can see it on the chart below of the iShares Semiconductor ETF (SOXX), which blazed higher in 2013 for what proved to be a massive bull run which is still under way and looks as strong as ever.
I have already suggested in an earlier alert a way of holding this ETF, by proxy as it were, by holding a selection of the strongest constituents.
SMCI – Most Overvalued or Most Exciting
What about SMCI where Cramer is so bearish? Is it the most overvalued stock in the market or more like what I would contend, the most EXCITING stock in the market?
I love the chart, especially BECAUSE it is so explosive.
The only mildly bearish thing about the chart is that the shares may be overbought but that always happens when a share takes off. It is the last time when you want to sell them. Just close your eyes, buy and pray. I do it all the time.
This can cause problems. On Tuesday after an incredible day on Monday, I was sold out of over half my holding in Microstrategy, literally in the last half hour of trading. Rage, fury and gnashing of teeth! It is not the end of the world because if they go up and Mow’s Bitcoin at $1m thesis is anywhere near right I will still do very well but even so it was a chastening experience.
I am considering as a sub-rule to control my manic gambling addiction that I allow myself to buy with 3/4/5 times leverage, not least because I cannot stop myself even though I know it is unwise. The sub-rule is that I must sell when my equity drops below 80pc of my margin instead of waiting for IG to sell when my equity drops below 50pc of my margin. This way I should lock in a larger chunk of my profits and be well-placed for the next crazy bet.
Readers will know how bullish I am about QQQ3. Unfortunately, it is hard, if not impossible to buy these shares in the UK because of the KID [key information document] rules. A subscriber has suggested LQQ3 as an alternative. It is the same ETF, quoted in pounds, and you can buy them. The shares are up 3.5 times since the last market correction low point which is excellent going. If the £ collapses as UK politics goes into some kind of meltdown when the infinitely merciful and sagacious George Galloway becomes our next glorious leader in a hastily assembled coalition with Nigel Farage, leader of the I’m a Celeb party, this ETF should do even better than QQQ3.
Strategy – Don’t Do What I Do, Do What I Say
You would not believe what has happened to me over the last several weeks. I have made a fortune, lost a fortune, made the fortune all over again and lost it all over again. It has been the wildest and most frustrating stock market ride I have ever experienced. Not boring, so that is a plus but there is no doubt that things could have turned out better. Fortunately, I am a very laid-back philosophical kind of guy or I might be just a teensy-weensy bit irritated. We live to fight again but perhaps better in defence as well as attack.
Contrary to Cramer who sees a potential top for the market this chart of the Nasdaq 100 looks amazing to me. A secular uptrend with a consolidation around the sharp, interest rate-driven correction in 2022 followed by a new breakout and a resumed uptrend.
We also have a great story in the form of Generative AI, a massive transformational ‘something new’ to take the technology revolution and the bull market to amazing new heights.
Cramer thinks SMCI is over-valued. I think they are growing explosively, have recently raised over $2bn in equity and convertible issues and talk of an acceleration in an already incredible growth rate. I guess that the next quarterly results, due on 30 April, are going to blow investors’ socks off.
Listen to this, which I have quoted before, from the latest quarterly report on 31 January 2024.
The exciting news is that, finally, we are entering an accelerating demand phase now from many more customer wins. To support faster growth, we have increased our working capital recently by raising about $600m with an equity offering [followed by another $1.725bn cash raise via a convertible issue at zero rate of interest]. Moreover, we have other programs to increase our cashflow without additional equity dilution to support short and long-term sustainable growth. Overall, I feel very confident that this AI boom will continue for another many quarters, if not many years. And together with the related inferencing and other computing ecosystem requirements, demand can last for even many decades to come, we may call this an AI revolution.
Charles Liang, CEO, Super Micro Computer, 29 January 2024
When I read further down the report I wonder if Cramer just got out of bed on the wrong side yesterday morning. This stock is incredible!
Supermicro is at the forefront of the AI revolution, where the pace of innovation is accelerating. We are leading the race by developing the most innovative AI infrastructure on many platforms at rack scale, for almost any industry, and for any market vertical. As the market leader, we have been preparing to more than double the size of our current AI portfolio with the coming soon NVIDIA CG1, CG2 Grace Hopper Superchip, H200 and B100 CPUs — GPUs, L40S Inferencing-optimized GPUs, AMD MI300X/MI300A, and Intel’s Gaudi 2 and Gaudi 3. All these new platforms will be ready for high volume production in the coming month and quarters.
Moreover, we are adding further optimised new architectures for the upcoming NVIDIA GPU product lines. Our AMD MI300X systems are sampling now, and our Intel Gaudi 3 system is coming soon. More importantly, we are continuing to invest and innovate in data centre and enterprise liquid-cooling technology to make sure these high-power AI platforms are in line with our green computing methodology, while improving the performance, efficiency, and reliability of systems in a data centre.
Charles Liang, CEO, Super Micro Computer, 29 January 2024
My advice is to BUY, BUY, BUY! Apart from anything else is this accelerating technology revolution going to come to a juddering halt in 2024, no way. It is still accelerating in the greatest thrill ride that our species has ever known.
So broadly, my advice is to keep taking the pills but don’t go mad like I do.
Share Recommendations
Nvidia. NVDA. Buy @ $872 (latest pre-market price)
Super Micro Computer. SMCI. Buy @ $1125
iShares Semiconductor. SOXX Buy @ $683 *(or buy the individual constituents recommended in a recent alert)
WisdomTree Nasdaq 100 3X Daily Leveraged (London version) LQQ3. Buy @ £143.03
*On looking I have discovered that the alert relating to the SOXX constituents has yet to be published so this is what I said.
My solution, maybe not ideal but maybe also with advantages, is to create your own ETF by buying the top holdings in the fund individually. Better still, buy the BEST of the top holdings individually. My choices would be – AMD, NVDA, AVGO, QCOM, LRCX (the chart looks amazing), ASML (another amazing chart), MU and AMAT (another great chart).
I could go further down the list but these shares should perform at least as well, probably better than the ETF. They can be bought in Share, CFD or Spread Betting accounts.
Unpublished QV Alert, 26 February 2024
SOXX Constituent Share Recommendations
Advanced Micro Devices. AMD. Buy @ $210
Nvidia. NVDA. Buy @ $873
Broadcom AVGO. Buy @ $1382
Qualcomm. QCOM. Buy @ $163.50
Lam Research Corp. LRCX. Buy @ $973
ASML Holdings NV. ASML. Buy @ $984
Micron Technology. MU. Buy @ $95.5
Applied Materials. AMAT. Buy @ $210
Stop-Press – Crowdstrike Shares Explode
Cyber security company, Crowdstrike, is a constituent of my Innovation Portfolio. They have just reported stunning results. As they have been so many times before the results were amazing.
CrowdStrike delivered an exceptional fourth quarter that far exceeded our expectations. It was another quarter of records: record net new ARR of $282m, continuing our acceleration trend, growing 27pc year over year; record operating margin of 25pc, up 10 percentage points year over year; record free cash flow reaching 33pc of revenue; and a free cash flow rule of 66; record GAAP profitability; and record cloud identity and next-gen SIEM (securioty information and event management) ending ARR of greater than $850m, together more than doubling year over year. These results illustrate CrowdStrike’s substantial and widening competitive mode, exceptional business acceleration, and validated market leadership.
George Kurtz, CEO and founder, Crowdstrike, Q4 2024, 5 March 2024
This guy knows exactly where he is going.
Building on my founding vision, CrowdStrike is the only single-platform, single-agent technology in cybersecurity that solves use cases well beyond endpoint protection. Falcon is the easiest and fastest cybersecurity technology to deploy. And our single AI-native platform makes vendor consolidation instant, frictionless, and natural. The feedback we receive from customers, prospects, and partners alike is consistent: eagerness to deploy the Falcon platform, ease of adopting more Falcon platform modules, and excitement from continuous innovation with new Falcon capabilities delivered weekly.
George Kurtz, CEO and founder, Crowdstrike, Q4 2024, 5 March 2024
They operate in a world straight out of science fiction.
What took adversaries hours has shrunk to minutes and seconds. Attack speeds will only accelerate. Second, the cloud is increasingly under attack. We tracked a 75pc increase in cloud intrusion attempts.
The cloud is today’s battleground for cyberattacks. And third, generative AI is an adversary force multiplier. Gen AI puts advanced cybercrime tradecraft in the hands of attackers of all skill levels. Gen AI will dramatically grow the adversary population.
The Global Threat Report showcases our threat intelligence leadership. We collect trillions of threat signals daily, creating one of the world’s largest and fastest-growing cyberthreat datasets. From day one, we’ve been an AI company, training the industry’s most effective and accurate AI models to prevent attacks based upon our data mode. Embedded in the Falcon platform is a virtuous data cycle where we collect cybersecurity’s very best threat intelligence data, build and train robust preventative and generative models, and protect CrowdStrike customers with community immunity.
Our team of data science PhDs operate this continuous and real-time process, constantly evolving Falcon’s AI foundation to predict adversary activity and stay ahead of threats. Our ever-growing data corpus and unique access to cyber’s freshest data at the source, alongside our technology and our human incident response, threat analysts, data science, and engineering expertise, together serve as a structural competitive advantage. Along with AI, cybersecurity is a top priority in my discussions with numerous boards. In today’s environment of heightened cyberattacks, the latest SEC breach disclosure regulation only increases the pressure on companies and their boards.
George Kurtz, CEO and founder, Crowdstrike, Q4 2024, 5 March 2024
Below is just a flavour of what is going on at this amazing company.
Our application of gen AI makes cybersecurity predictive and accessible for all skill levels. It’s all on one platform, one agent, and one integrated workflow. Next, delivering the right solutions. Our market-leading cloud security, identity protection, and next-gen SIEM solutions are in demand because they solve painful customer problems.
These businesses collectively are more than doubling year over year, each are IPO-able businesses, and each play lead roles in Falcon platform consolidation. I’d like to start with our breakout cloud security solution, where we are setting new records and winning at scale. Our cloud security momentum accelerated in the quarter, with net new ARR growing nearly 200pc year over year. At more than $400m in ending ARR, CrowdStrike is one of the largest cloud security businesses in the market and was recently positioned as a market leader in Forrester’s cloud security wave.
George Kurtz, CEO and founder, Crowdstrike, Q4 2024, 5 March 2024
Last but not least.
Our pace of innovation has never been faster.
George Kurtz, CEO and founder, Crowdstrike, Q4 2024, 5 March 2024
This company has become ever more amazing and has a strong partnership with recently recommended Dell Technologies.
Since announcing our Dell partnership last year, we’ve transacted more than $50m of total deal value together with customers in every segment and geography. We’re in the early innings of where this partnership is going, and I’m thrilled with the momentum that we have with Dell as they standardise new offerings, such as their own MDR [managed detection and response] service on Falcon.
George Kurtz, CEO and founder, Crowdstrike, Q4 2024, 5 March 2024
Dell Technologies. DELL Buy @ $119.50
Crowdstrike. CRWD. Buy @ $365
