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Nvidia (NASDAQ: NVDA) recently became the most valuable company in the world and after a rapid explosion in its stock price it saw a leapfrog an apple.
With its market cap at a staggering $3.6trn, it is the most expensive of all London Stock Exchange!
But a sad memorial day is approaching in March. That will mark a year since I sold my Nvidia shares. Since then, the stock is up 60% (see Homer Simpson’s famous catchphrase)!
To be honest, I thought I was probably giving up more gains in the near term, hoping to avoid a big pullback in the medium term. However, I failed to consider the possibility of a Trump comeback, tax cuts, repeals, and all of it. In short, the unrestrained release of animal spirits on Wall Street.
These spirits are so infected that even Europe prefers to use artificial intelligence (AI) rather than simply control it. The Labor Government has said it wants “mainline AI in the veins” of the UK, although some of the uses (such as optical tunnels) are not too slow for the heart.
Still, AI chip king Nvidia’s growth trajectory seems unstoppable again. So, should I buy the stock again in 2025?
Hitting the bot
Since it looks like I sold Nvidia too early, my human mind is clearly and infallible. So I enlisted the help of ChatGPT’s silicon AI brain.
It informed me that Nvidia’s data center segment is growing rapidly due to the proliferation of cloud computing and AI adoption. The bot confirmed to me that “the ongoing AI revolution is in its early stages“.
However, it warned that higher interest rates, inflation, and possible inflation in 2025 could hurt tech stocks. I would go along with the first few risks, although the likelihood of a recession seems low. Indeed, Torsten Sløk, a leading economist at Apollo Global Managementrecently he said he thinks the chances of a recession in the US this year are now 0%.
ChatGPT indicated that the stock is generally highly valued. That’s true, as the price-to-earnings (P/E) ratio is 58.
On the other hand, it convinced me that Nvidia has been delivering strong revenue and earnings growth. That’s no small feat because in late 2022 (just before ChatGPT was released and when I last bought shares) the company’s Q3 2023 revenue was down 17% year over year. Profits down 72%!
This highlights the state of the semiconductor industry cycle (which the AI assistant highlights, that it is correct).
Now, I had to push ChatGPT to get off the phone and give me an ‘idea’. It does, somehow, I say if I “I believe in the long-term growth of the world in AI, machine learning, and cloud computing, Nvidia can be a great addition [my] portfolio in 2025.”
None of this helped me much.
Shopping?
Tech companies are apparently increasingly relying on artificial data (ie generated by algorithms) to train AI after exhausting all human-generated data. But the challenges you have to overcome now include missing objects and even falling models.
Will the large language models prove profitable and justify the extraordinary expenditure? Or are companies overspending? I’m still left with the nagging feeling that Nvidia’s sales, pricing power, and ultimately fat margins are unsustainable.
Because of this doubt, I will not invest again.
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