Want to See It, Kinda See It, at Least I See the Numbers
I owned a few AI related names heading into this week – I had some PLTR, some INOD also some LPSN (which hasn’t worked, and I should probably dump). I also own GOOGL of course.
The first two have been almost like placeholders, I don’t really trust them, but they keep my foot in the door just in case AI is as big as the hype. I have kept my positions small enough so as not to do damage if it isn’t. Because I haven’t been able to really “see it”, as they say.
I needed an ‘aha’ moment. When I’m like oh, I get it, this is going to be huge.
As of today, I still don’t feel like I’ve quite had that aha moment. But I’m closer to one after those NVDA results.
I just can’t ignore results like what NVDA released Thursday. I mean to project nearly $4b more revenue in fiscal Q2 than analysts had expected is crazy. Something is going on here. I still don’t know exactly what, what it means or who is going to benefit, but I have to pay attention here.
I remember the commodity boom of 2003-2007. There was lots of poo pooing of the doublings that happened in a couple months at the start of that boom. I’ve told the story before but I remember Aur Resources went from like $2 to $4 in a month or two after basically doing nothing for a decade. And then I bought it, even though it made me ill. But it turned out it was just the start of a 5 year move because of China. Aur eventually got taken out over $40.
I don’t want to discount that possibility here. That this is real and just the start.
I was actually short a little VICR heading into the NVDA results. I know VICR well, I trade the stock back and forth because of that, and their outlook from the last earnings call was just so awful, while the stock had gone up to high-$40s, so it seemed like a decent swing short back to the low $40s. But on Wednesday night I quickly covered and flipped long.
NVDA’s call not only said their H100 GPU was selling strong, but all their GPUs were selling strong and VICR has power conversion products on those other GPUs as well as other companies AI geared GPUs (VICR is also potentially going to be in the H100 at some point but that is a long story that would be an entire post). I also bought some PATH, bought some SNOW and took smaller starters in IBM and HPE.
I don’t know if I will keep all those names. I really don’t know what I’m doing here, at the moment there is an element of stabbing at the dark looking for winners, which is why all these positions are small. I tend to act first and then look deeper because I don’t have the time. I add and quickly subtract if I dig in and it doesn’t make sense. I’ll probably have sold 2-3 of those names by mid next week and maybe added others as I figure out what I really want to own.
I still don’t really see “it”. “It” being, how is this going to play out. But what I do “see” now is how big the numbers can be. The NVDA results were just so impressive.
I mean I look at the NVDA results. The EPS forecast from analysts for their fiscal Q224 (current quarter) nearly doubled overnight from just over $1 per share to $2 per share. It feels absolutely crazy to say this, but I don’t even know if NVDA is actually all that expensive here – and that is after the stock has gone up 4x in the last 6 months! I mean if they keep beating estimates, what if they are doing $12 or $14 EPS in their fiscal 2025 (YE January 2025). Estimates for F2025 right now are at $10 but were $6 just 3 days ago! $390 divided by 14 is 27x EPS. Its not ridiculous.
So I see it, I see the numbers. What I don’t see is how this impacts everyone else. I can’t wrap my head around it yet. Maybe the impact to IBM is negligible. Maybe PATH is a loser in all this (LPSN seems to be). Maybe PLTR is just full of BS with comments like this (from their Q1 earnings call):
in the last 20 years, there’s never been a development like this. You have a technology that will allow you to outproduce, change the margin of your company, understand your business, react on the battlefield quicker, predict things on the battlefield in a way, collapse your enterprise so that the top and the bottom actually work together, preempt attacks, create a software that is so obviously dominant that adversaries quiver and scurry away instead of attacking us or our allies.
I bought PLTR right after reading this earnings transcript. I remember saying to my wife, I don’t know if these guys are full of shit or not, and they very well may be, but if anyone believes what they are saying, the stock is going up.
I was sitting at the kitchen table that night and i said to her: “I have no idea what is going on here or why this is AI is a big deal but there are companies losing their shit over this.” True story.
Flash forward to today and I still have no clue what to believe. Which is why its difficult to write this post. You want to write to inform. But I am writing to say, “I think there might be something going on here. I don’t really understand it. TBH it kinda triggers my BS meter. But I’m wading in further”.
You gotta listen to the market. Right now, the market is saying there is something going on, and this feels like it could be the start of one of those secular changes.
You can easily call these moves a bubble or irrational or a blow off top. The chart of NVDA certainly looks like that. But sometimes these things are legitimate secular moves. Again, I can’t shake my copper analogy. If it hadn’t been for Donald Coxe looking at those same copper stock charts up 50%-100% in a few months and saying you have to buy these things now, I never would have had the courage or insight to do it.
I just want to have that broader aha moment for what AI can do for so many stocks to go along with what I had (too late) this week for NVDA. Unfortunately, its not as obvious as a “1 billion people moving from china countryside to cities” where the thesis just jumps off the page at you. But that also means opportunity. My suspicion is that some of the winners are going to be losers and vice versa. That should mean lots of opportunities for the next while. If I can only figure them out.