The Long Term Investor

Those of us that are educated investors....fail to realize that there are many people...perhaps a majority....that are just starting to become aware of NVIDIA. So for them and others....

How Nvidia beat everyone else in the AI race
The company you might not have heard of is now worth $2 trillion — more than Google or Amazon.

https://www.vox.com/money/2024/3/7/24092309/nvidia-stock-earnings-valuation-ai-explainer

(BOLD is my opinion OR what I consider important content)

"Only four companies in the world are worth over $2 trillion. Apple, Microsoft, the oil company Saudi Aramco — and, as of 2024, Nvidia. It’s understandable if the name doesn’t ring a bell. The company doesn’t exactly make a shiny product attached to your hand all day, every day, as Apple does. Nvidia designs a chip hidden deep inside the complicated innards of a computer, a seemingly niche product more are relying on every day.

Rewind the clock back to 2019, and Nvidia’s market value was hovering around $100 billion. Its incredible speedrun to 20 times that already enviable size was really enabled by one thing — the AI craze. Nvidia is arguably the biggest winner in the AI industry. ChatGPT-maker OpenAI, which catapulted this obsession into the mainstream, is currently worth around $80 billion, and according to market research firm Grand View Research, the entire global AI market was worth a bit under $200 billion in 2023. Both are just a paltry fraction of Nvidia’s value. With all eyes on the company’s jaw-dropping evolution, the real question now is whether Nvidia can hold on to its lofty perch — but here’s how the company got to this level.

From games to crypto mining to AI

In 1993, long before uncanny AI-generated art and amusing AI chatbot convos took over our social media feeds, three Silicon Valley electrical engineers launched a startup that would focus on an exciting, fast-growing segment of personal computing: video games.

Nvidia was founded to design a specific kind of chip called a graphics card — also commonly called a GPU (graphics processing unit) — that enables the output of fancy 3D visuals on the computer screen. The better the graphics card, the more quickly high-quality visuals can be rendered, which is important for things like playing games and video editing. In the prospectus filed ahead of its initial public offering in 1999, Nvidia noted that its future success would depend on the continued growth of computer applications relying on 3D graphics. For most of Nvidia’s existence, game graphics were Nvidia’s raison d’etre.

Ben Bajarin, CEO and principal analyst at the tech industry research firm Creative Strategies, acknowledged that Nvidia had been “relatively isolated to a niche part of computing in the market” until recently.

Nvidia became a powerhouse selling cards for video games — now an entertainment industry juggernaut making over $180 billion in revenue last year — but it realized it would be smart to branch out from just making graphics cards for games. Not all its experiments panned out. Over a decade ago, Nvidia made a failed gambit to become a major player in the mobile chip market, but today Android phones use a range of non-Nvidia chips, while iPhones use Apple-designed ones.

Another play, though, not only paid off, it became the reason we’re all talking about Nvidia today. In 2006, the company released a programming language called CUDA that, in short, unleashed the power of its graphics cards for more general computing processes. Its chips could now do a lot of heavy lifting for tasks unrelated to pumping out pretty game graphics, and it turned out that graphics cards could multitask even better than the CPU (central processing unit), what’s often called the central “brain” of a computer. This made Nvidia’s GPUs great for calculation-heavy tasks like machine learning (and, crypto mining). 2006 was the same year Amazon launched its cloud computing business; Nvidia’s push into general computing was coming at a time when massive data centers were popping up around the world.

Nvidia has joined the ranks of tech titans designated the “Magnificent Seven”
That Nvidia is a powerhouse today is especially notable because for most of Silicon Valley’s history, there already was a chip-making goliath: Intel. Intel makes both CPUs and GPUs, as well as other products, and it manufactures its own semiconductors — but after a series of missteps, including not investing into the development of AI chips soon enough, the rival chipmaker’s preeminence has somewhat faded. In 2019, when Nvidia’s market value was just over the $100 billion mark, Intel’s value was double that; now Nvidia has joined the ranks of tech titans designated the “Magnificent Seven”, a cabal of tech stocks with a combined value that exceeds the entire stock market of many rich G20 countries.


“Their competitors were asleep at the wheel,” says Gil Luria, a senior analyst at the financial firm D.A. Davidson Companies. “Nvidia has long talked about the fact that GPUs are a superior technology for handling accelerated computing.”

Today, Nvidia’s four main markets are gaming, professional visualization (like 3D design), data centers, and the automotive industry, as it provides chips that train self-driving technology. A few years ago, its gaming market was still the biggest chunk of revenue at about $5.5 billion, compared to its data center segment, which raked in about $2.9 billion. Then the pandemic broke out. People were spending a lot more time at home, and demand for computer parts, including GPUs, shot up — gaming revenue for the company in fiscal year 2021 jumped a whopping 41 percent. But there were already signs of the coming AI wave, too, as Nvidia’s data center revenue soared by an even more impressive 124 percent. In 2023, its revenue was 400 percent higher than the year before. In a clear display of how quickly the AI race ramped up, data centers have overtaken games, even in a gaming boom.

When it went public in 1999, Nvidia had 250 employees. Now it has over 27,000. Jensen Huang, Nvidia’s CEO and one of its founders, has a personal net worth that currently hovers around $70 billion, an over 1,700 percent increase since 2019.

It’s likely you’ve already brushed up against Nvidia’s products, even if you don’t know it. Older gaming consoles like the PlayStation 3 and the original Xbox had Nvidia chips, and the current Nintendo Switch uses an Nvidia mobile chip. Many mid- to high-range laptops come packed up with an Nvidia graphics card as well.

But with the AI bull rush, the company promises to become more central to the tech people use every day. Tesla cars’ self-driving feature utilizes Nvidia chips, as do practically all major tech companies’ cloud computing services. These services serve as a backbone for so much of our daily internet routines, whether it’s streaming content on Netflix or using office and productivity apps. To train ChatGPT, OpenAI harnessed tens of thousands of Nvidia’s AI chips together. People underestimate how much they use AI on a daily basis, because we don’t realize that some of the automated tasks we rely on have been boosted by AI. Popular apps and social media platforms are adding new AI features seemingly every day: TikTok, Instagram, X (formerly Twitter), even Pinterest all boast some kind of AI functionality to toy with. Slack, a messaging platform that many workplaces use, recently rolled out the ability to use AI to generate thread summaries and recaps of Slack channels.

Nvidia’s chips continue to sell out — for now

For Nvidia’s customers, the problem with sizzling demand is that the company can charge eye-wateringly high prices. The chips used for AI data centers cost tens of thousands of dollars, with the top-of-the-line product sometimes selling for over $40,000 on sites like Amazon and eBay. Last year, some clients clamoring for Nvidia’s AI chips were waiting as much as 11 months.

Just think of Nvidia as the Birkin bag of AI chips. A comparable offering from another chipmaker, AMD, is reportedly being sold to customers like Microsoft for about $10,000 to $15,000, just a fraction of what Nvidia charges. It’s not just the AI chips, either. Nvidia’s gaming business continues to boom, and the price gap between its high-end gaming card and a similarly performing one from AMD has been growing wider. In its last financial quarter, Nvidia reported a gross margin of 76 percent. As in, it cost them just 24 cents to make a dollar in sales. AMD’s most recent gross margin was only 47 percent.

Nvidia’s fans argue that its yawning lead was earned by making an early bet that AI would take over the world — its chips are worth the price because of its superior software, and because so much of AI infrastructure has already been built around Nvidia’s products. But Erik Peinert, a research manager and editor at the American Economic Liberties Project who helped put together a recent report on competition within the chip industry, notes that Nvidia has gotten a price boost because TSMC, the biggest semiconductor maker in the world, has struggled for years to keep up with demand. A recent Wall Street Journal report also suggested that the company may be throwing its weight around to maintain dominance; the CEO of an AI chip startup called Groq claimed that customers were scared Nvidia would punish them with order delays if it got wind they were meeting with other chip makers.

“The biggest challenge for Nvidia is that their customers want to compete with them”
It’s undeniable that Nvidia put in the investment into courting the AI industry well before others started paying attention, but its grip on the market isn’t unshakable. An army of competitors are on the march, ranging from smaller startups to deep-pocketed opponents, including Amazon, Meta, Microsoft, and Google, all of which currently use Nvidia chips. “The biggest challenge for Nvidia is that their customers want to compete with them,” says Luria.

It’s not just that their customers want to make some of the money that Nvidia has been raking in — it’s that they can’t afford to keep paying so much. Microsoft “went from spending less than 10 percent of their capital expenditure on Nvidia to spending nearly 40 percent,” Luria says. “That’s not sustainable.”

The fact that over 70 percent of AI chips are bought from Nvidia is also cause for concern for antitrust regulators around the world — the EU recently started looking into the industry for potential antitrust abuses. When Nvidia announced in late 2020 that it wanted to spend an eye-popping $40 billion to buy Arm Limited, a company that designs a chip architecture that most modern smartphones and newer Apple computers use, the FTC blocked the deal. “That acquisition was pretty clearly intended to get control over a software architecture that most of the industry relied on,” says Peinert. “The fact that they have so much pricing power, and that they’re not facing any effective competition, is a real concern.”

Will the AI love affair cool off?

Whether Nvidia will sustain itself as a $2 trillion company — or rise to even greater heights — depends, fundamentally, on whether both consumer and investor attention on AI can be sustained. Silicon Valley is awash with newly founded AI companies, but what percentage of them will take off, and how long will funders keep pouring money into them?

Widespread AI awareness came about because ChatGPT was an easy-to-use — or at least easy-to-show-off-on-social-media — novelty for the general public to get excited about. But a lot of AI work is still focusing on AI training rather than what’s called AI inferencing, which involves using trained AI models to solve a task, like the way that ChatGPT answers a user’s query or facial recognition tech identifies people. Though the AI inference market is growing (and maybe growing faster than expected), much of the sector is still going to be spending a lot more time — and money — on training. For training, Nvidia’s first-class chips will likely remain the most coveted, at least for a while. But once AI inferencing explodes, there will be less of a need for such high-performance chips, and Nvidia’s primacy could slip.

Some financial analysts and industry experts have expressed wariness over Nvidia’s stratospheric valuation, suspecting that AI enthusiasm will slow down and that there may already be too much money going toward making AI chips. Traffic to ChatGPT has dropped off since last May and some investors are slowing down the money hose.

“Every big technology goes through an adoption cycle,” says Luria. “As it comes into consciousness, you build this huge hype. Then at some point, the hype gets too big, and then you get past it and get into the trough of disillusionment.” He expects to see that soon with AI — though that doesn’t mean it’s a bubble.

Nvidia’s revenue last year was about $60 billion, which was a 126 percent increase from the prior year. Its high valuation and stock price is based not just on that revenue, though, but for its predicted continued growth — for comparison, Amazon currently has a lower market value than Nvidia yet made almost $575 billion in sales last year. The path to Nvidia booking large enough profits to justify the $2 trillion valuation looks steep to some experts, especially knowing that the competition is kicking into high gear.

There’s also the possibility that Nvidia could be stymied by how fast microchip technology can advance. It has moved at a blistering pace in the last several decades, but there are signs that the pace at which more transistors can be fitted onto a microchip — making them smaller and more powerful — is slowing down. Whether Nvidia can keep offering meaningful hardware and software improvements that convince its customers to buy its latest AI chips could be a challenge, says Bajarin.

Yet, for all these possible obstacles, if one were to bet whether Nvidia will soon become as familiar a tech company as Apple and Google, the safe answer is yes. AI fever is why Nvidia is in the rarefied club of trillion-dollar companies — but it may be just as true to say that AI is so big because of Nvidia."

MY COMMENT

No one can see the future.....but for now.....this is such a HUGE WAVE....I have no choice but to ride on. The similarities to MSFT in the time period 1990 to 2000 is just too strong for me to ignore.

I rode that wave to millions......so that probably makes me BIASED....when it comes to this wave.

 

COSTCO today.

Costco stock closes for worst day in nearly two years on quarterly revenue miss

https://finance.yahoo.com/news/costco-stock-set-worst-day-172915236.html

BUMMER....but...way overblown. The recent much larger membership numbers will mean HUGE profits when they raise membership fees in the next 3-9 months.

(BOLD is my opinion OR what I consider important content) (this was updated today)

Costco shares news on its next membership fee increase
The warehouse club has seen its membership grow and its retention rates remain very high.

https://www.thestreet.com/retail/costco-makes-a-decision-on-membership-price-increases

"Costco Chief Financial Officer Richard Galanti has led the warehouse club's earnings calls for more than 30 years.

His no-nonsense style is mostly business with little bits of humor and playfulness mixed in.

That run came to an end with Costco's fiscal-second-quarter-earnings call. The CFO acknowledged his unprecedented effort in his remarks.
"I'd like to take a moment to say thank you to many of you who have tuned into each quarter, some for many years, to allow me to share with you Costco's results, both our ups and our downs and, thankfully, many more ups and downs and provide some fun and informative color on how we're doing along the way, he said.

Since Costco went public in December 1985, "I have hosted all but one call. It has been an absolute privilege and honor to do so, so thank you all."

During many of those calls, Galanti has faced questions about whether Costco will increase the cost of membership. Generally, the chain lifts that cost every five to six years, but it has not done so since 2017. A Gold membership costs $60 and an Executive membership, which comes with 2% cash back up to $1,000, is $120.

That puts it well overdue for an increase, and it was only fitting that Galanti addressed the issue one final time during his last earnings call as CFO.

Wall Street analysts expected. If you put those expectations aside, by most standards the warehouse club had a very strong quarter.

Net sales for the quarter increased 5.7% to $57.33 billion from $54.24 billion in the year-earlier quarter. Net sales for the first 24 weeks increased 5.9% to $114.05 billion from $107.68 billion.

Costco also had strong membership-growth and renewal numbers. Membership-fee revenue came in at $1.11 billion, up $84 million, or 8.2%, in the quarter, compared with a year earlier.

Galanti offered some insight on those numbers during the call.

"In terms of renewal rates, at the second-quarter end our U.S. and Canada renewal rate came in at 92.9%, which is up 0.1% from Q1 and 12 weeks earlier, and the worldwide rate came in at 90.5% similar to the last quarter," he said.

"Membership growth continues. We ended the second quarter with 73.4 million paid household members, up 7.8% versus last year, and 132 million cardholders, up 7.3%, with continuing growth throughout the quarters."

Those are stellar numbers, and with the chain's overall sales growth, Galanti was asked once again — for the last time — about a membership-price increase.

Costco CFO answers membership hike question

Sharing a price increase in his final earnings call as CFO would have been a fitting ending to Galanti's career. Instead, questioned about the matter, he repeated the same general words he has leaned on for roughly the past two years.

"It's when, not if, still. But really, we're — joking aside, we're not that smart in terms of figuring out exactly why. I mean, we know that all the factors that we believe would — if we wanted to do it when we feel comfortable in terms of renewal rates, new member signups, loyalty, all those things are continuing in the right direction," he shared.

Galanti generally offers little color aside from the "when, not if" line, but he was more expansive during this call.

"It really is a function — and I don't think it would be done simply because, hey, things have slowed down a little bit, let's do it now. We like the fact that we're performing well. We like the fact that all — almost all metrics are going in the right direction in our business right now. We've got plenty of runway left," he added.

He closed the discussion on the topic by making clear that the company has not made a decision.

"And given the economy and given everything else, it's us, it's Costco. So I think it is simply still not trying to be cute about it. It's not some big analytical formula. It's simply a measure of, we will, at some point, I'm sure, do it," the outgoing CFO said.

 

I Ike this little article.

Pods, Passive Flows, and Punters

https://www.albertbridgecapital.com/post/pods-passive-flows-and-punters

(BOLD is my opinion OR what I consider important content)

"Ive banged on about the market being a voting machine in the short term for years. I’ve tried considering about how long that short term actually is, and how it isn’t necessarily as short as many of us would like.

Part of the explanation may be the continued rise of two factors that tend to impact that definition of “the short term.” One big one is the trend toward indexing. I mean, I get it. I get why my RIA buddies all recommend owning diversified indices that minimize expense ratios and maximize diversification. I get why they recommend “owning the market” and eschew individual stock-picking. However, and I don’t think they would argue this point, inclusion in the right index at the right time can actually impact how much a stock is worth (at least temporarily) – and as funds continue flowing out of more active strategies into more passive ones – this can extend “the short term” from a few hours to a few days, weeks, months, or (potentially) even longer periods.

Many of us probably remember when it was announced that Tesla was entering the S&P 500. Rumors started circulating in September of 2020, with the stock as low as $110. By the time the announcement was made on November 17, the stock was trading at $136. And when it was actually included in the index on December 21, it had surged to $231, and it continued up to $300 by the end of January.

Now, sure, there were other dynamics affecting the stock, and other dynamics that affect all stocks. We will discuss some of them below. But there is no doubt that inclusion in the S&P 500 Index mattered for Tesla. It mattered so much that my former professor Merton Miller is probably rolling in his grave.

And the next question is how long we have to wait for that price pressure (in either direction) to subside. This one can be a real rabbit hole, and I want to stay practical with this article, but if you have any curiosity in the history of the academics and empiricists trying to answer this question, you’ll find this linked article interesting too.

Anyway, the other factor that I believe has contributed to the market’s focus on the short term (and concomitant volatility) is the change in market structure. That factor is the rise of the pods.

If you don’t know what a pod is, think of Millennium, Point 72, or Balyasny. These pod shops attract some of the best stock picking and/or trading talent in the world, and a few of the teams have incredible track records. A few don't. Those that don't meet the criteria are shut down. They are all a little different, but all somewhat similar too. The bottom line is that there are rules in place that force their PMs to reduce exposures in losing positions. Of course they aren’t stupid about it, but in he aggregate I believe this exacerbates volatility.

And that brings us to the impact of the retail investor. The punter. And, more specifically, what the impact of social media means for price discovery.

I haven’t done any empirical work at all, but suspect that companies where retail investors are more prevalent, either in ownership or in the percentage of daily trade flows, also have an impact on volatility. And, more specifically, an impact on our definition of “the short term.”

We of course all saw that with the meme stock frenzy during COVID, from the behavior of stocks like Peloton and Carvana to the surreal craze that surrounded Gamestop and AMC. There may even be cases where the meme-stock impact on the valuation of a stock has not yet subsided. And when you combine this with the passive nature of the non-retail investors with forced exits (or indeed avoidance) of certain investments, price discovery suffers, and that short-term ends up being more than short.

But I am as convinced as ever that, eventually, it is the fundamentals that matter. Eventually, the market is a weighing machine. If you want some evidence – even from some of the most iconic, well-followed, index-heavy, retail-engaged, pod-owned, successful companies, it is still, eventually, about the fundies.

Let’s take some of the winners as an example. And by winners, I mean game-changing, world-dominating winners.

You’ve surely noticed what has happen to Nvidia lately. We used to just call these winners FANGs, and then FAANGs and then FAMANGs, but Nvidia has insisted on joining the league table. It now has a $1.7 trillion market cap. And in the last five years, the stock is up about 1,700%. Guess what else is up about 1,700%?

Nvidia’s earnings estimates.

How about Facebook, aka Meta, which goes through periods of hatred and love with equal vigor? Well, over the past seven years it has bounced around a lot but still has generated nearly 260% returns. And forward earnings projections? They’re up 280%.


We can stretch things further back, and look at Google over the past 14 years (earnings up 885%, stock up 980%); or Amazon during the same period (earnings up nearly 2,500%, stock up about 2,800%).

Or we can go waaay back and analyze Microsoft over the past 22 years. Forward earnings projections have increased from $0.93 in February of 2002 to $11.57 today. That’s nearly 1,150%. The stock is up just over 1,200%.

And finally, from one of my favorite former-CEOs Reed Hastings, we have good old Netflix. About 18 years ago, analysts were forecasting that Netflix would generate 11 cents of earnings in the coming 2006 year. Here in 2024, they are forecasting a whopping $17 of earnings in the coming year. That is a whopping EPS increase of 14,889%.

And how about the stock? We’ll it is up a whopping 14,882%.

Fundamentals matter, sports fans. Fundamentals matter.

Admittedly, some of these examples above are very long-term, but even when we self-select with some of the biggest, most exciting, long-term winners out there, and ignore the losers (of which there are many), it is still clearly apparent that it is the fundamentals that matter most.

So basically, it probably isn’t terrible advice to ignore the rest of it. Ignore the noise. Ignore the talking heads on CNBC. Ignore prognostications of meme-stock sith lords. Ignore the volatility. Embrace it, actually. And just focus on the fundamentals. Get those right, and you will likely win."

MY COMMENT

YES you will.....win....if over the long term you are invested in companies with great fundamentals. Or perhaps another way to say it is ICONIC companies that are long term winners. Of course to be in that category the fundamentals must be very good. One is a reflection of the other.

 

Personally I dont think you can draw much comparison between those two stocks and the companies....or any other companies. Each company and their fundamentals and businesses are just too different. Every company is an individual. The CEO of NVDA and MUSK are extremely different, especially in terms of celebrity and public attention and personality.

I do believe that the 24/7 media and the markets are very "compressed" now.......but...regardless I see NVDA as having a significant probability of being able to remain the dominant....top dog....in their business for at least five years and perhaps ten years or more. It will all depend on management of the company and keeping the founders on board.

I have NEVER been a big fan of auto companies........and at this moment TSLA is an auto company. They do have the potential to develop into an AI company and a charging station company. I believe outside of AI......TSLA has a very significant chance to make a fortune from their charging network. But once the number of EV vehicles being sold rises to a big, significant, share of the auto market, they will be competing with all the oil companies and every one else for that business.

As to a split....NVDA is way past due for a split.

Personally I would compare owning NVDA, and the potential future for NVDA, to the past 20+ years of APPLE, AMAZON, MICROSOFT, and GOOGLE.

 

Well lets look......MSFT was KILLING it by about 1994.....their market cap.....$22,062,950,000. ONLY EIGHT YEARS after going public. NVDA has been building the base for what is happening now for TWENTY FIVE YEARS....having gone public in 1999.

https://www.statmuse.com/money/ask/msft-market-cap-in-1994

Compared to one of the GIANT companies of the time PROCTOR & GAMBLE........at.....$22,640,591,360 market cap.....in 1994.

https://www.statmuse.com/money/ask?q=procter+&+gamble+market+cap+1994

At that time just like now....lots of people thought it was crazy what was going on with MSFT. In 1994 P&G was the number 6 company in the SP500.

My view is you cant just look at figures like market cap.....you have to look at what the company is and what they are doing and the source of their success. We are now in the CPU/chip era. NVDA is earning that market cap by selling product and by fundamentals and forward guidance. They are all the RAGE in the media right now....but that does not change the fact that much of their market cap and value is justified. Sometimes it takes slow growth for a company to become in the top ten of the SP500 and become dominant. Sometimes...it happens very quickly when there is a business earthquake...a sudden sea-change.....like happened with MSFT. AND....like NVDA....sometimes a "SUDDEN" success....took 25+ years to happen.

I guess the bottom line.....is what is happening with NVDA justified....or...is it some sort of "FAD".

I guess we will all find out over the next five years how this all works out once it is hindsight....till than it is all speculation....except for the actual fundamental business results.

 

What is also shocking is what MSFT was doing with so few employees. Their work force by year:

1990 5635.
1991 8226
1992 11,542
1993 14,430
1994 15,257

https://stockanalysis.com/stocks/msft/employees/

So when I bought my 1000 shares of MSFT in 1990...... the start of the BOOM ERA.....they only had 5635 employees and had been a public company for ONLY FOUR YEARS. In hindsight....I guess that looks like.....a very RISKY stock buy. BUT.....was it?

For comparison NVDA currently has 30,000 employees and does most of their production by contract with other BIG companies.

SIDE-NOTE: Back in 1990 to 2000....our kids played with friends that lived two houses down.....their dad had an employee number under 50 at MSFT. He only got to middle management.....and was a CPA type and very frugal.....but when some people were buying a lake cabin......they bought an entire.....very large lake. They were extremely wealthy but very down to earth.....their kids were just normal public school kids.

 

Incidentally.....in 1990....just four years after going public MSFT had a market cap of $4.6BILLION. That GREW to over $22BILLION in just FOUR years.

https://www.statmuse.com/money/ask/microsoft-market-cap-1990

 

By the start of 1995.....MSFT market cap......$35BILLION.

AND....the were number EIGHT in the SP500.....as ONLY a NINE year old public company. By 1999....THIRTEEN years after going public.....they were NUMBER ONE in the SP500.

https://www.benzinga.com/general/ed...-it-took-microsoft-to-reach-a-100b-market-cap

 

It is FUN playing with data. BUT in the end.....investing success.....depends of the ability to....."SEE" and "FEEL"....where a business is going. We all....myself definitely included....think we can do it. BUT....is it real? Can we really do it? Or is it simply luck.

I look back and think......could I do what I did over again......if I had to? I DONT KNOW. I guess that is the hindsight evaluation of your life when you get old.

I guess in the end it does not matter if it was luck......you did it.....it happened. Just be thankful and humble that it did.

 

The......SUNDAY MUSINGS....of an old investor.

 

Well.......my view....NVDA is about where MSFT was in 1994/1995. MSFT having at that point become number EIGHT in the SP500 against the MONSTER consumer companies and ICONIC businesses......like EXXON and GE.....and being a total upstart newcomer.

Four or five years later they were....NUMERO UNO. I can see NVDA in about 4-5 years being NUMERO UNO.

The EPIC run up for MSFT lasted about twelve years.......1990 to 2002. NVDA is only a couple of years into their epic run up.

Personally I see no real relevance to comparing market cap now versus way back in the 1990's. In fact......as an investor......comparing or looking at market cap is not something that I really care about in evaluating a business.

I see the primary factor for how long NVDA will BOOM as being......how long can they continue to innovate and stay.......one to five steps......ahead of the competition. The competition being INTEL and AMD. I believe they might be able to stretch that dominance to 5-10 more years. Perhaps even more if they can keep their current management in place.

AND whether it is two years.....five years...or ten years.....at the end of the BOOM they should be a company that will continue to be a MONSTER for a long time. Just like AMZN, MSFT, AAPL, GOOGL, META, etc, etc.....have been able to do.

 

DUNE II.....YES. I really liked both the DUNE movies. They are a great.....well made.... story....together. Even if you did not read the books....in my view. Of course I did read the books back in the 1970's.

SO....Zukodany......"you" are the guy texting and messaging and posting on your phone while at the movies. Well.....since it is Stockaholics....you get a pass.

 

A little market hangover today from the FRIDAY FREAKOUT. A fair number of articles over the weekend about a market collapse. BROTHER.

This constant fear mongering is not healthy for the markets. What would be good would be rational and realistic coverage of the markets....with clinical honesty. That is what it used to be like in the old days......pre-DOT-COM boom.

The OBSESSIVE focus on the short term and sensational now is CRAZY. I just heard a TV business show in the background asking....when will NVDA come back up. WTF......if has been down slightly more than.......drum roll please.......ONE DAY.

The constant fear mongering and stress inducing media coverage will eventually take hold and kill the markets It might take ten, twenty years...but it will happen. Right now we are training a whole generation of young investors that this GARBAGE is normal. As it continues for another 20-30 years the vast majority of investors will have been trained that this constant fear mongering view of the markets is NORMAL. THIS......WILL.....change investor behavior...even long term behavior.

BUT....I will not be around for it to all hit the wall in about 20-30 years......so that is .....their problem.

 

I like this little article.

How investor sentiment can move markets
Stocks move most on the gap between reality and expectations, with current data showing more gains ahead

https://www.thenationalnews.com/business/money/2024/03/05/how-investor-sentiment-can-move-markets/

(BOLD is my opinion OR what I consider important content)

"So far, so good! My 2024 outlook called for a good-to-great year, and the 4.8 per cent global returns up until February 27 speak to just that. More gains await.

One key reason? Sentiment. Stocks always move most on the gap between reality and expectations, so gauging the latter is key to any outlook.

There are hard ways to assess this. But also easy ones anyone with web access can do.

Today, easy or hard, both methods reveal dourness dominates – paving the bullish road forward.

Legendary investor Sir John Templeton famously said: “Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”

Recent years are examples: After 2020’s rocket ship market recovery from Covid lockdown lows – itself born in despair – sentiment warmed unusually fast in 2021.

Frothy pockets emerged in speculative assets like crypto and special purpose acquisition company initial public offerings, making stocks susceptible to negative surprises.

Then came Ukraine, inflation, central bank rate hikes, supply chain chaos and more. The result? The small-sized bear market in 2022.

Yet, by October 2022, long-running fears drove irrational pessimism, ushering in the positive surprise that birthed this beautiful bull market.

Now, sentiment has warmed somewhat – to scepticism.

Consider this: The Bank of America’s February fund manager survey revealed the most bullishness since January 2022, while many other surveys show similar outlooks.

Yet, bears take this too far, arguing that we fast-forwarded to optimism … even euphoria!

They point to stale fears like the Israel-Gaza war and eurozone economic weakness as “evidence” investors are too cheery, setting stocks up to fall – while claiming only a handful of stocks (the Magnificent Seven) underpin this bull market.

Wrong! Nearly a third of global stocks lead the world in the year-to-date.

So, how can you see sentiment relatively clearly? One tough way my company does, but you probably can’t replicate, is illustrative: Plotting professional sentiment bell curves.

Wall Street forecasts both reflect and influence sentiment. My company collects dozens of them from everywhere.

The aim? Revealing which outcomes are widely expected and discussed … and which aren’t. This doesn’t reveal what will happen – stocks pre-price common forecasts and do something different.

But it shows what people think will happen and hence is already priced in stocks – a sentiment signal.

Consider median S&P 500 forecasts versus actual returns in recent years: At 2018’s start, the median forecast saw 5.3 per cent gains excluding dividends. Reality? Stocks fell 6.2 per cent.

In 2019, the median was 15.8 per cent gains – yet stocks crushed it, rising 28.9 per cent.

Last year's forecasts versus expectations were at 9.4 per cent, way below the actual 24.2 per cent.

Starting this year, the median was just 1.8 per cent – way below US stocks’ long-term 10.2 per cent annualised average return without dividends, which includes bear markets. It’s hard to see 1.8 per cent as “too optimistic”.

Don’t stop at median forecasts. Look deeper.

Out of 54 professional S&P 500 2024 forecasts, 40 cluster between 2.9 per cent and 9 per cent returns – while nine see declines worse than 3 per cent. Nonesee returns exceeding 17.1 per cent.

The greater prevalence of lacklustre or negative returns than double-digit gains show you sentiment isn’t near euphoria. It is middling at most.

The relative void above 10 per cent suggests above-average gains. All this is hard to do.

There are easier tools you can use. One: Track how economic data compares to estimates.

You can find consensus forecasts for global gross domestic product, inflation, employment, purchasing managers’ indexes and more on many financial and economic news websites.

Then, as outcomes are announced, compare the results to the expectations. Are they worse than expected? Then, sentiment is probably too optimistic.

Are they better? Too dour! As expected? In the middle.

Recently, most key data are trending above estimates – thanks to lingering inflation and recession fears.

Stocks always move most on the gap between reality and expectations, so gauging the latter is key to any outlook

Another way: Consider IPOs. I have long said IPO actually means “It’s probably overpriced”, given companies do IPOs when prices are best for sellers (founders and early investors) – not buyers.

Heavy issuance usually follows a big rise, when recent returns boost spirits and elevate demand, allowing top dollar pricing.

Earlier IPO successes often fan optimism further, leading to more lower-quality listings flooding markets.

Hence, sunny sentiment is detached from weakening fundamentals.

The Middle East’s strong 2023 was an exception to the global IPO desert.

Now? US and European issuances are up from last February, and analysts see more ahead.

But issuance remains muted overall – revealing scepticism, maybe some optimism but certainly not euphoria.

Many companies issuing shares lately use the proceeds to retire costlier debt. Plus, today’s IPOs are more established – think ARM and Shein – unlike 2021’s speculative Spacs.

Nothing euphoric there.

Whether you choose easy or hard methods, tracking sentiment is key. Today, it all signals more gains ahead."

MY COMMENT

I have never invested through KEN FISHER or his company. BUT when I hear him talk on TV or read his content.....it is always spot on. PLUS....it is so refreshing to hear an old time investor talk in the market language of the old days. Such a rare thing these days......in the era of the breathless, shouting, opinion based, BS coverage that is considered NORMAL now.