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☕ Nvidia isn’t as expensive as critics think

Mar 04, 2024

Good morning! 👋

The indices are in retreat after touching record highs last week.

Don’t let that bug you.

The markets require buying and selling to move higher so the fact that we’re seeing a bit of that from time to time like we are today is a sign that the markets are working normally.

There’s plenty of profit potential ahead, just not in a straight line.

Here’s my playbook.

1 – Apple’s $1.95B fine is a rounding error

The European Commission, which is the EU’s executive arm, hit Apple with a $1.95 billion antitrust fine over its music streaming apps alleging that Apple prevented developers from informing iOS users about alternative cheaper music subscription services available outside the app. (Read)

Shares are down 2.67% as I type to $174.86.

Give me a break.

The penalty is less than ½ of 1% of Apple’s net sales last year; it’s not even a rounding error in the scheme of things.

Besides, anybody who is smart enough to figure out steaming media services and pay for ‘em already knows that there are alternatives.

What regulators the world over cannot understand is that customers want Apple products and will pay a premium to get ‘em.

MyPOV: Companies like Apple are changing the world we live in while regulators grasp at straws and long a return to the world we lived in, emphasis on past tense. The question you want to think about as an investor is do you bet on regulators trying to hold you back or CEOs charged with moving you forward. I’ll take CEOs any day of the week.

2 – Sorry sparky, NVDA isn't as expensive as you think

NVDA has returned 75.89% YTD and 2,149.33% over the past 5 years.

It's “too expensive” cry the naysayers and more than a few know-it-alls who I suspect may have missed the entry or have no other card to play but to rain on the parade of others because they may not have one of their own. 🤦‍♂️

Try this on for size.

Assuming NVDA’s Q1 projections are on track – and I think they are – that translates into roughly $100B in annualized sales this year or 55%-58% YoY growth. If you run the numbers backwards, that suggests the PE ratios many are so worked up about could be roughly half the listed figures.

MyPOV: Investing in the rearview mirror is foolish. The markets are forward looking, especially when it comes to stocks like NVDA. There is always a way into the fight... change your tactics, buy less, DCA/VCA in, buy fractional shares. But not buying into a trend that will put $15T into global GDP??!! These folks probably thought Amazon was “just a bookseller” too. Sigh.

3 – Bitcoin $65K: Wall Street will not go home empty handed

Bitcoin has now hit $65,127 and is coming off its best week in almost a year.

Excellent!

That said, the realized price may be as low as $42,000 which means that unrealized profits are approaching record levels.

Big traders have greed glands just like everyone else and right now they’re working overtime.

Many, particularly those at the upper end of the scale, have a vested interest in short-term profits while the majority of retail investors on board could be playing because they think there’s long-term value.

It’s a mismatch that potentially sets up a portfolio wrecking rug-pull.

Stay frosty if you’re on board!

4 – The only way Boeing recovers

Hopes are running high that Boeing’s “back” now that is reportedly in talks to purchase Spirit, which makes the fuselages for Boeing jets. Both manufacturers have been struggling with production problems as they try to turn out Boeing’s top selling plane. (Read)

Continue to short, avoid or keep on the putskies I suggested a while ago. BA shares are down -21.47% YTD while Airbus and Embraer have returned 9.38% and 17.55% respectively.

$180 a share, potentially lower.

I could see $150 without much of a stretch if this keeps up, or down as the case may be.

MyPOV: The only way forward is a complete reset at the C-level and holding every regulator who signed off on what’s happened to date accountable. Btw, I don’t think I’m off base here; whistleblower Ed Pierson, himself a former senior Boeing manager, believes the entire 737 fleet should be grounded. (Read)

5 – IT bubble fears are overblown, here’s why

I’m often asked if there’s an “IT” bubble, particularly when it comes to AI. That’s a logical fear, particularly for investors of a certain, err, vintage, like I am who lived through the Dot Com Crash.

My $0.02 is no – those fears are overblown.

Here’s a slide from a recent keynote I delivered that may help assuage any fear you’re feeling.

This genie isn’t going back in the bottle any time soon.