Nvidia Rally Continues

Nvidia Rally Continues

June 26, 20243 min read

We added Nvidia (NVDA) to our Growth & Income and Growth model portfolios early last year. Since then, the stock price has soared. This year institutional investors continued to add NVDA to their portfolios on bullish forecasts the company’s chip and GPU (graphic processor units) will increase in demand. The stock is up 154.9% YTD through today.

Last week NVDA surpassed Microsoft (MSFT) as the most valuable company in America with a roughly market capital value of $3.34 trillion. On June 13, Apple was the most valuable company and now in just two weeks has embarrassingly fallen to the third largest company in America.

On June 7, NVDA completed its 10 for 1 stock split. My experience is favorable in owning companies that have stock splits when they are in a growth trend with strong fundamentals and investor support. Last month, the chip maker posted another blockbuster quarter with a 262% increase in revenue and a 462% increase in profits year over year (YoY).

We lived in San Jose, CA (aka Silicon Valley) during the late 1990’s and 2000’s. During that time, I developed many client relationships, some of whom have close ties to the technology industry. All expressed to me recently their bullish forecast for NVDA.

Wall Street Journal reported on June 9, the following:

“Governments are boosting their budgets and brandishing other incentives to encourage local companies and multinationals to build new data centers and refit old ones with specialized computer chips, mostly from Nvidia. The goal: to develop AI locally and train large language models in their native languages, based on their own citizens’ data…

Among the biggest spenders on sovereign AI is Singapore, whose national supercomputing center is being upgraded with Nvidia’s latest AI chips and where state-owned telecom Singtel is pushing an expansion of its data center footprint in Southeast Asia in collaboration with Nvidia. The country is also spearheading a large language model that is trained in Southeast Asian languages.

Other big projects are taking place in Canada, which last month pledged $1.5 billion as part of a sovereign computing strategy for the country’s startups and researchers, and Japan, which said it is investing about $740 million to build up domestic AI computing power this year following a visit from Huang [Jensen Huang, CEO and founder of NVDA].

Similar pushes are spreading across Europe, including those in France and Italy, where telecom companies are building AI supercomputers with Nvidia’s chips to develop local-language large-language models. French President Emmanuel Macron last month called on Europe to create public-private partnerships to buy more graphics processing units, or the core chips used to train AI, to push its share of those deployed globally from 3% currently to 20% by 2030 or 2035.”

Many analysts agree that Nvidia has many more years of growth. The key to NVDA is its leadership over its competition with its patented chip development. Some sources told me that no company is within two years of competing with NVDA’s current chips and the company has announced the next generation of faster chips that may be available by fall 2024.

What Does This Mean to Me?

The application of artificial intelligence (AI) programming and software is at its earliest stages. The AI industry reminds me of the disruptive technology introduced in the early 1990’s such as portable cell phones, home computers, dot matrix color printers, and the internet. In the early 1990s, many of the industry leaders at the time including companies like Intel (INTL), AOL (AOL), Cisco (CSCO), Microsoft (MSFT), Apple (AAPL), and Veritas (VTRS) provided significant returns to their investors who rode the wave of their explosive growth.

New industries and technologies can provide a continued tailwind to the US economy and stock market. Many investors are patiently waiting for the Federal Reserve to lower rates before investing (good luck). We see terrific opportunities in technology, energy, and banking to name a few. We maintain our favorable view of the US economy and stock market.

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