Except these might be long term duds.
The latest AI bandwagons hype cycle invites silliness.
One would be wise to look at the entity in questions overall health prior to announcing aome whole-hog AI effort.
Due dilligence, etc
We have investment based on hype and lies, and the outcome is that the actual labor the market implores is misdirected and falls short of its purpose of raising the net quality of life through real creation of value.
This is Buffett’s point. When the market loses $1T in a day, it will definitely come back if you have a long term horizon.
Just like if you bought nasdaq after the 2000 crash.
That being said, the period isn’t important. But that the big stocks will likely still be up in the long run.
1) Cisco had good hardware, but nothing that commodity gear couldn’t also do. Nvidia have a substantial moat.
2) Cisco had a p/e of 700! Nvidia is at 60.
3) Cisco had a decent order book during the boom, but nothing to justify their price. Nvidia’s order book is… unholy.
I do think there’s a lot of hype around the various FOMO/ridealong stocks - but nvidia, I earnestly think remains undervalued.
NVidia has 6x the cash-on-hand (>$30B) than their closest competitor (AMD) ($5B), and all of that can go towards GPU R&D rather than being split between CPU+GPU R&D (AMD has 10% of the $65B GPU market share but 33% of the $50B CPU market share — their CPU business is almost 75% of their total business). If there are changes needed to stay competitive, NVidia has the warchest they need to adapt. Just their cash on hand would allow them to fumble an entire release cycle and still catch back up.
Sure, if ROCm ever achieves parity with CUDA then Nvidia’s margins will finally decrease but the only way they’re facing any existential threat is by massively fumbling internally. If you have reason to believe that Nvidia will start executing poorly, then that would potentially be a valid concern — but so far they’re continuing to do great work despite their massive lead and their prices reflect their technical lead over their competitors.
0: https://www.theverge.com/2024/6/26/24186432/microsoft-window...
And as Bezos says, your margin is my opportunity, and nvidia makes humongous margins right now. It will attract investments in competitors. And if a competing GPU is half as powerful but a third of the price, it will eat market shares and compress margins. Unless customers cannot switch, but I don't believe that to be the case.
As the CEO from Sun Microsystems said after the bubble burst:
"At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends.
That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate.
Now, having done that, would any of you like to buy my stock at $64?
Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"
The number is more like 30 for Nvidia today...
Also, McNealy’s comment isn’t quite applicable because stocks aren’t bonds. There’s an inherent value to the ongoing operation beyond just paying the earnings out.