I Said I Wouldn’t Write This…
I told myself I wasn’t going to do this. In fact I had another article mostly written…
But then…Nvidia…
And I get it. It’s like the Bat Signal when the financial media is hitting the hysteria button…kinda hard to ignore…
Nobody does hysteria like the Twitter-sphere (or whatever it’s called now, the X-scape maybe?)… just flipping out in the wake of Nvidia’s latest earnings release — gotta get those likes, gotta hit those trending keywords and ticker symbols…
But heavens to Murgatroyd, comments like “somebody’s cooking the books, have we not learned anything from Enron?” And “if Nvidia can’t break last week’s high, short the crap out of it”…
Really?
Enron was born from energy deregulation, and since nobody really knew what that meant, a giant co-op of shell companies trading fake derivatives and calling it money, built a giant ponzi scheme and fooled Wall Street.
I understand that we don’t really know what AI means just yet…
But — short it? Actually bet your own money that shares of Nvidia will go down? That is unbelievably bad advice. Like criminally bad. I don’t necessarily have an opinion on which way Nvidia’s shares go today, or tomorrow…
The stock was up 10% or so after the earnings release, it backed off a little to +7% around 7 pm, right about the time when I realized I had no choice but to wade into the fray.
Nvidia beat every estimate by at least 10%.
And guided everything for the next year 10% higher.
So a 7% gain after hours, maybe that’s not so outrageous.
Because the simple fact is: we have never seen a growth story comparable to the one that Nvidia is writing…
Biggest Revenue/Earnings Gains in History
There are, according to superstar analyst Dan Ives, 4 waves of this AI adoption. They are:
* First and current wave: Cloud, hyperscalers and AI startups infrastructure build.
* Second wave: Enterprise generative applications (aka Copilot)
* Third wave: The largest wave, heavy industries that benefit from generative of AI.
* Fourth wave: Sovereign AI. Countries that want AI for their intelligence and culture.
Ives goes on to say that we are 25% through the first wave.
I can’t tell you if he’s right. I’m not going to tell you he’s wrong either. If anybody knew that AI was gonna ramp up like it clearly is right now; well, Nvidia would’ve been a $1.8 trillion company last year.
But it wasn’t. Because while plenty of investors were looking forward to the AI age, most of us weren’t putting actual numbers on the kind of revenue that AI would generate…
At least not the kind of numbers that Nvidia is putting up. Nvidia’s numbers are breathtaking, in the truest sense of the word, Phenomenal. And they are not the result of Enron-style book cooking.
One year ago, Nvidia reported $0.88 a share for earnings per share, beating the $0.81 estimate by…nearly 10%…
Last night, Nvidia reported $4.93 in per share earnings. $0.88 to $4.93 in a year. That’s nuts. And we know these aren’t Enron-style earnings…
Because we know that because Nvidia doesn’t make its own chips. Taiwan Semi (NYSE: TSM) makes them. And their capacity is maxed out, to the point that TSM is adding capacity as fast as it can.
Plus, Nvidia has put out the Bat Signal to Intel (NASDAQ: INTC) for help. Nvidia is literally selling every chip it can pay somebody else to make.
Infrastructure
Going back to Ives’4 waves of AI adoption, we’re in the infrastructure build part. That is, upgrading data centers like Amazon Web Services and Microsoft’s Azure and all the other data centers out there so they can handle the stupid amount of data that’s coming down the pike.
We’ve seen this before — railroads, telegraph, broadcast networks, long distance telephone, the internet, mobile networks…
Pay attention to those historical precedents. Because every time, there were winners and there were losers. Every time, some investments paid off,’others didn’t. Every time, Enrons showed up, usually during the later stages.
But every time, unimaginable capabilities emerged. Every time, we’ve looked back and wondered how did people ever get along without this?
Call it a bubble if you want, I won’t argue with you. But I will tell you: these are the times when fortunes are won.
And I’ll also tell you how to proceed: buy the leaders.
It comes down to who you wanna trust to get Ives’ first AI wave and the waves to follow right. Some “$2 Stock That Will Dominate AI” teaser that shows up in your inbox? Or Microsoft, Google, or yeah, Nvidia?
If you wanna drop down to the second tier of proven players, check out the one Christian DeHaemer told you about a couple weeks ago…
That’s it for me today, take care and I’ll talk to you soon…
Briton Ryle
Chief Investment Strategist
Pro Trader Today
brit.ryle@protradertoday.com
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