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I Scottish Mortgage Investment Trust (LSE: SMT) price is not stable in 2024. In fact, as I write, it’s up 16% year to date.
But the US Nasdaq The index has gained almost twice that, at 31% since the beginning of 2024. It keeps breaking all-time records. Scottish Mortgage invests heavily in Nasdaq stocks.
The result is that the investment trust’s shares now trade at a 12% discount to their net asset value (NAV). Essentially, that means we can buy £1 worth of the world’s top technology growth stocks for just 88p.
Don’t you want to grow up?
Do UK investors not realize what has happened Nvidia in 2024? It’s up 172%, and up a whopping 2,100% over the past five years.
It has retreated slightly from its recent high in early November. But we’re still looking at a market cap of $3.3trn. Oh, and Nvidia is one of the top 10 trust companies. As is Teslawhich has been firing lately.
Bubble is scared
One thing that is clear is that Scottish Mortgage investors fear that the Nasdaq is overstocked and headed for a crash. And there should be a real chance for that.
The current state of Artificial intelligence (AI) has been glowing. But there are a few voices out there that suggest it’s too hot. It seems to me that spending on AI by 2024 should decrease, as many companies don’t see how to turn it into profit.
Does it sound like the dotcom boom of 1999? It does for me. But since then, the handful of companies that really know how to make the Internet work have risen to numbers far greater than that high number.
Measurements
Are Nasdaq stock ratings unrealistic? I’m not sure they are. Nvidia is at a forward price-earnings (P/E) ratio of 47, not the many hundreds we’d fear. And income forecasts will drop that to just 25 by 2027.
Nvidia is the number one star in the AI processor market right now, so isn’t that an understatement? A lot depends on what the competition can come up with. But it doesn’t scream extreme to me.
And then when we look Amazonthe largest holding Scottish Mortgage, we see a P/E of 44, falling to 30 in 2026 forecasts. Again, I don’t see that as unreasonable.
Now, there is a very real risk that all these AI-driven stocks could go down significantly by 2025. I don’t want to suggest otherwise.
Rock climbing
But have investors going this far enjoyed the thrill ride? Aren’t they happy to put down their money and hope for a multibagger in the next decade or two?
Actually, some are probably like me. I’m not really a growth investor, but I like to have a little money in something like this that can do really well.
I’m happy to hold Scottish Mortgage, even if I’m at risk. And I think I might even see some good upside opportunities if 2025 turns out to be as volatile as I expect.
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