We wrote a report 2 weeks ago titled What did we learn from this week’s Sohn conference, as recession fears mount? A key theme was the opportunities associated with Artificial Intelligence (AI) which will clearly have a huge impact on how businesses (Market Matters included) operate in the future. At a tangible level, AI will increase productivity, and make it cheaper to deliver products & services, which will drive better earnings. More broadly, the possibilities are endless, but scary.
- Microchips are already at the heart of the devices that we use to work, travel, stay fit and entertain ourselves – from cars to smartphones and from MRI scanners to industrial robots and data centres, and they are at the heart of AI.
Nvidia makes high-performance microchips that power AI software and services. This $US758bn goliath should generate $30bn of revenue in FY24 with post-tax profit of US$11bn. Trading on an Est PE for FY24 of 66.7x, it is phenomenally expensive, even for the ~30% earnings growth that is expected over the coming 4-years.
- While we are bullish on the outlook for AI, we do not advocate chasing AI related stocks into new highs
MM is keen to accumulate NVDA into weakness, not chase strength
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