Stock price when the opinion was issued
One of the things his team's looking at right now is that it seems some of the regulations surrounding the semiconductor industry will be reduced (specifically China, but other countries as well). That could mean an expanded market for the semi manufacturing equipment companies, such as KLAC. AVGO has also been a strong performer, and he owns some NVDA. Those two names have strong relative price performance, are economically sensitive, cyclical, and have pricing power.
Considers the US restrictions as short-term obstacles. Stock's starting to rebound quite nicely. The leader today in AI computing, and for the foreseeable future. Strong global thirst and demand for AI infrastructure. Unmatched advantages compared to other names in the space. Data centres are driving growth. Recent earnings beat.
AI adoption is still in very early stages. Still trading at 1x PEG ratio. Earnings growth is not reflected in the valuation. Sees EPS at 33% going forward. Yield is 0.03%.
Used to make 75% gross margins, but those have jumped to 90%. If it goes back to historic gross margins, even if sales continue, you'll see a huge degradation in profit. Sweet spot in terms of demand. Market thinks it can do no wrong. Worries that demand will abate or just normalize. Good news is baked in. Watch your position size.
We reiterate NVDA as a TOP PICK. News of a new Chinese AI competitor shook the value of the stock off its highs, but analysts feel US tech giants will continue to invest in American AI -- especially based on recent US Administration pledges to keep the US the king of AI. The drop in share price has brought value to under 30x earnings -- compared to highs near 50x. We like that recent reported earnings showed cash reserves building as shares are aggressively bought back and debt is retired. We continue to recommend a stop at $116, looking to achieve $175 -- upside potential of 29%. Yield 0.1%
(Analysts’ price target is $175.12)