Good morning, Phil Rosen here, writing to you from New York. Last week I asked you all a question in the newsletter — Do you own Nvidia stock? — and many of you told me that you’ve held shares for years and it’s paid generously.
One of you even told me you first bought the stock when Nvidia was $16(!) per share more than 20 years ago.
It’s just under $400 today. That’s some serious foresight, my friend!
So far in 2023, the stock is up 165%. Today we’re breaking down what’s behind that surge.
1. Nvidia is the clear winner in the AI arms race so far. It’s the company that appears best positioned to dominate the burgeoning sector, my colleague Matt Fox writes, and more and more investors continue to wake up to the potential of artificial intelligence.
Baird strategist Ted Mortonson chalks it up really to the foresight of CEO Jensen Huang, calling the Nvidia chief a “true visionary” for predicting the changes in the market and his understanding that software would be key for the future.
“Jensen understood where the market was going before the market even materialized,” Mortonson told Insider, adding that some of the company’s tech has pushed the AI sector forward by leaps and bounds.
Nvidia effectively provides a one-stop shop for what customers need to drive their AI ambitions. They control their entire ecosystem on both hardware and software, similar to Apple, and Mortonson said that puts them years ahead of competitors.
CFRA analyst Angelo Zino echoed that, pointing out that the company commands almost the entire GPU market within the data center space.
“GPUs are going to be enormous, not only in gaming and data centers, which is essentially the bulk of their revenue today, but autonomous cars and other capabilities over time,” Zino said.
“How they work with these enterprise companies is invaluable and a big reason why we do think that they’re likely going to sustain a market share position north of 90% in the foreseeable future.”
What’s your stock outlook for Nvidia? Tweet me (@philrosenn) or email me (email@example.com) to let me know.
In other news:
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2. US stock futures rise early Tuesday, after the Biden administration and Republican lawmakers reached a tentative deal on raising the US debt ceiling. Check out the latest market moves.
3. Earnings on deck: AMERCO, HP, and more, all reporting.
4. A 30-year fund manager with $1 billion in assets under management shared the AI companies he’s most excited about. Gregg Fisher warns against investing in stocks just because they have “AI” in their name, and said investors should first key in on how a company is using the technology to optimize growth. Here’s his strategy for nailing down stocks in the space that have the potential to grow over the next five years.
5. A secretive hedge fund has likely notched a $5 billion gain on Nvidia stock this year. Jennison Associates has almost a 1% stake in the surging company, and that slice has ballooned in value from $3.4 billion to $8.6 billion this year — assuming it hasn’t cashed out.
6. The credibility of the West’s sanctions on Russian oil are at risk if the price cap isn’t lowered. At least according to a CREA report that showed a weakening effectiveness of the mechanism, with Moscow’s oil export revenue rebounding in March and April. In the think tank’s view, countries in the price cap coalition need to “get a grip.”
7. The US’s steep borrowing is a threat to the dollar. Promises to cut spending will likely be “negated and forgotten,” Jim Grant said, and that’s weighed on demand for dollar-denominated Treasury bonds. Full details.
8. Famed economist David Rosenberg said home prices are still set to fall further. Buyers are retreating to the sidelines and a hawkish Fed means mortgage rates are going to stay high, he explained. By his estimate, monthly payments for first-time buyers are up 33% compared to last year.
9. Buy these seven small-cap stocks that can crush the market in any economy. That’s according to a fund manager who outperformed 99% of his peers last year. See his favorites.
10. Marvell Technology followed Nvidia’s rally and surged double-digits on Friday. Shares of the company hovered near their biggest single-day spike ever, and the chipmaker credited AI for its upbeat quarterly outlook. Chief executive Matthew Murphy said the company is looking at the “tremendous” potential AI could offer the business.