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Why I bought Nvidia in 2014 & why I still own it.

Feb. 29, 2024
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My current take on Nvidia.

Background

The first time I bought Nvidia was in 2015 at $9. (Stock Split adjusted)

It is curreny trading at $188. Representing an initial increase of close to 2000%, which makes it my 2nd best investment ever. My best investment ever was making mistakes.

Just over a month ago it was $330 a share.

It was almost definite that a pullback would happen in Nvidias share price.

But, I still own it and will comtinue to hold for many hears to come.


Markets

If you want a 20X, you need to be able to hold it when its a 3X investment. Its gauranteed that youll see various pullbacks in that period as well.

Since I invested in Nvidia 8 years ago, there has been various pullbacks.

After each pullback, I got tempted to sell.

But in all cases, I would have been filled with regret.


{ We need to ask ourselves when we want to seel a company.

What changed, Why sell? }


Why I still own Nvidia:

The semiconductor industry is huge.

I currently own only 2 semiconductor companies, namely Nvidia & AMD.

(I posted my AMD research note on the FinMeUp app about a week ago)

 

Nvidia has shown incredible execution the past few years.

Its important to note, that they are essentially the infrastructure to many innovations.

Its a bet on:

  • Gaming
  • Crypto
  • AI/machine learning
  • Metaverse

As well as the usual technologies such as phones, laptops, cameras, cars etc.
 

Im bullish for the long term, because there will be continuous high demand for Nvidias services and products.

They are also working on various other innovations such as the Omniverse.
 

Im also bullish, because Nvidia has shown that they can execute in a highly competitive but fast growing industry.

 

Growth

Nvidia will post their Q1 results on the 25th of May.

Will be interesting to see how they performed.

Looking at their Q4 results of 2021:

  • Record quarterly revenue of $7.64 billion, up 53 percent from a year earlier
  • Record fiscal-year revenue of $26.91 billion, up 61 percent
  • Record quarterly and fiscal-year revenue for Gaming, Data Center and Professional Visualization
     

That is some impressive growth!

Main Comments from CEO:

We are seeing exceptional demand for NVIDIA computing platforms

NVIDIA is propelling advances in AI, digital biology, climate sciences, gaming, creative design, autonomous vehicles and robotics some of today's most impactful field

We are entering the new year with strong momentum across our businesses and excellent traction with our new software business models with NVIDIA AI, NVIDIA Omniverse and NVIDIA DRIVE. GTC is coming. We will announce many new products, applications and partners for NVIDIA computing.

 

Opinion: This seems pretty bullish.

But, we have seen recently, that if companies dont post blowout results, their will be selling pressure. Will this be the case for Nvidia on the 25th? Well have to wait and see.

 


Risks

  • I expect a  bit of a slowdown in some of Nvidias revenues such as gaming, but who knows.
  • Still expensive compared to competitors


Valuation

Nvidia stock sells for around 38 times current year earnings and 32 times forecasts for earnings in 2023. (Valued on trailing earnings, the stock has an even higher P/E of 48). Even the most generous measurement of earnings, therefore, would require Nvidia to achieve and maintain 32% long-term earnings growth to maintain a PEG ratio of 1.0 -- and 32% long-term growth could be problematic according to Morgan Stanley analyst.
 

  • Macroeconomy

As the economy face challenges, so will Nvidia.


 

Conclusion

Its all about the bigger picture.

Personally, I think I wont regret it if I hold Nvidia for another 8 years.

Will there be more pullbacks?

Highly likely.

Will I buy more at these levels?

No, but I bought more AMD shares recently.

I think AMD is priced much better than Nvidia & they are executing like machines.

Excuse the pun.
 

Im definitely not selling my Nvidia shares, but in the short term, Im not too optimistic. Lets hope their Q1 results suprise.


I am looking to open a new position in another semiconductor company that I believe is recession proof to a large extent.

Will share it next week.

 

(Disclaimer: This is not financial advice. Always do your own due diligence when it comes to managing finances. I am invested, so I have biases.

 


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