Why I Bought Nvidia Into Monday’s AI Panic
The AI selloff has investors running. I’m doing the opposite.
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It’s ugly out there Monday morning. Shares of chip designers, chip manufacturers and all AI-related companies were hit with steep declines on Monday after several executives at leading U.S.-based AI companies called for slowing the pace of this kind of technological development amid concerns over potential risks to humanity.
The beatdown started in Asia. Softbank (SFTBY), a large investor in OpenAI, was down more than 13% on Monday in Tokyo. In Seoul, memory chip makers SK Hynix (SKHY) and Samsung Electronics (SSNLF) gave up more than 6% and 4%, respectively. Taiwan Semiconductor (TSM) was trading nearly 4% lower as well. Taiwan Semi is currently the second-largest holding in the Sarge-folio.
Bought Some Nvidia
It’s true. My Sarge-folio bought some Nvidia (NVDA) Monday morning. Yes, we’re in a lot of chip and AI stocks. Sure, we’re getting punched in the nose on these at the moment. It’s also true that we’re up nicely since initiation on almost all of those names. Not that I know that this dip is the one to buy. It’s that I do know that Nvidia will remain at the forefront of the cloud-based, autonomous automation, artificial intelligence revolution.
Won’t spending on AI slow down now that key players are worried about a human extinction event? Maybe. Probably. The fact is also this: The bad guys will continue to develop this technology. The good guys are going to be forced to develop the same technology just to keep the bad guys in check. The lines between what is a good guy and who is a bad guy may change often going forward.
The fact is that these horses have left the barn. The cat is out of the bag. If the U.S. or Chinese or Russian or other militaries are concerned about near-peer adversaries gaining advantage, they won’t be able to “slow the pace.” If criminal enterprises are going to try to gain an advantage, then law enforcement will be forced to try to keep up. A lot of dough is going to go into the development of AI for nefarious purposes whether we like it or not.
Those who might be on the side of legitimate business or countering those nefarious efforts are going to require the same kinds of funding that goes into ripping off or threatening the masses. I don’t like it either, but it’s too late to go back and try something else.
Nvidia Ripped the Cover Off of the Ball
Again. Just three weeks ago, Nvidia reported its fiscal second-quarter financial results. The company posted adjusted EPS of $2.22 on revenue of $96.22 billion. That beat Wall Street by more than $4.0 billion and was good for year-over-year growth of 106%.
For the current quarter, CEO Jensen Huang’s firm projected revenue of $108.0 billion (+/-2%) vs. consensus for $104.6 billion. That would be good for growth of roughly 90% and Nvidia Is known for beating its guidance.
Of the 42 analysts that I know to cover NVDA, 35 have already revised their earnings estimates higher for the current quarter since it started.
Readers will see that NVDA opened just below its 50-day simple moving average (SMA) and just below the lower trendline of our Andrews’ Pitchfork model. I added at that line during the pre-opening session.
I will also add below that level after publication at least once. Will I admit I’m wrong? You know I will (I always do), but not until this stock loses its 200-day SMA at $197.
At the time of publication, Guilfoyle was long TSM and NVDA equity.
