Opinions
Danesh Rohinton
NVIDIA Corporation
NVDA-Q
HOLD
Sep 30, 2024
Stock price when the opinion was issued
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Took a write down on chips, stock fell. Trading at ~21x PE. Really has a monopoly; AVGO may be getting close, AMD not close at all. New products coming out with Blackwell. Companies will continue to spend, if not as much. Earnings growing rapidly, great balance sheet, no debt. A chance to get a leader at a very good multiple.
If it gets into the $90s, in a couple of years you won't regret buying. Growth will come from big tech players in US and Europe, not China so much. Yield is 0.04%.
When DeepSeek came out, he started selling out of this position. People are selling the Mag 7, and there might be some anti-US sentiment globally. Recent charges on China, tariff concerns. At some level it becomes cheap; at 15x 2027 earnings, with 28% growth, it's gotten oversold. Blackwell chips are the catalyst.
Will only work if we're still in a bull market. US administration could tip us into a recession. Risk to this name, especially with no dividend. Start picking away ~$100-104. Be an incremental purchaser of growth names for when we do come out of this darker economic time.
The DeepSeek threat is overblown; we're not seeing mass cancellation of orders at Nvidia, but even an increase--chips are sold out for the year. Alphabet just praised its relationship with NVDA. And yet, NVDA hasn't recovered from January's DeepSeek news. He trimmed his holding, but still owns a lot of shares. However, the White House has made NVDA a political football. Shares should not have fallen in the first place.
He has been buying tech during this dip, in April particularly. We will eventually exit this volatility and find stability and confidence in the market again. Meta and Microsoft are some of his key holdings, and they affirmed their capex guidance--they are spending to make incredible investments over the next three years, because they know AI is the biggest super-cycle every in technology. There is incredible pent-up demand for AI from businesses and consumers. The CEO of MSFT reported that his company processed 50 trillion tokens last month alone, or 3.5 million years of AI conversation.
Clearly the leader. Everyone loves the Blackwell chip, and people pay a lot for it because there's no competitor. Grew revenues over 100% last 2 years; estimated at 50% this year. Tariff impact unknown. Risk is competition. Once we conclude the data centre buildout cycle, what then?
His firm owns AVGO as a proxy for the chip buildout.
So tied into ETF buying and selling that when it sells off, it's very aggressive. If you believe in the stock longer term, then buy when there's a big selloff. Current leader in AI, but it won't be the only game in town. CEO is dumping stock like a wild man, so be careful.
Has to be in your top 5 holdings, even at $137. If you can ever get it just under $100, it'll be golden for you, you'll just have to back up the truck. 12-month price target of $161.40, and that's only going to move up. NVDA is to GPUs as AAPL is to smartphones. Making a lot of "other bets" that will pay off for them as it did for GOOG.
If you don't own it, buy 1/4-1/3 of a position here, another bit in the $120s, and then around $110.
Will a new Blackwell chip they will send to China be a big source of income? Doesn't know, but what is Trump's view of this deal? China can play the long game vs. the U.S. As for NVDA's earning this week, analyst estimates are spanning a broad, but not crazy $140-200. There are 68 buys, 9 holds and 1 sell. For NVDA to take out $150 resistance, their quarter must be stallar and include no worries about China--and he doesn't see that. So, the stock may retreat to around $120, but not to April's lows in the $90's.
Keep a position in it, but remember its risk profile. Not expensive valuation, but fundamental revenue growth and margin expectation will be under scrutiny as they move from Hopper to Blackwell. Are revenues durable? Expect 20-30% volatility in share price.