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Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), and AMD (NASDAQ: AMD) are likely to feel the brunt of an industrywide slowdown in PC sales. This video will highlight why that's the case and what it could mean for investors.
On April 12, 2023 at 15:00:03 ET an unusually large
$1,015.03K block of Put contracts in NVIDIA
(NVDA) was bought,
with a strike price of $250.00 / share, expiring in 16 days (on April 28, 2023).
Fintel tracks all large options trades, and the premium spent o
The
artificial intelligence (AI) race likely started the moment OpenAI's
ChatGPT was unleashed to the world. Undoubtedly, Nvidia (
NASDAQ:NVDA
) is an AI innovator that's eager to sprint faster in a race that promises considerable long-term upside for the frontrunners. At its pace of innovation, I think the odds are good that Nvidia will emerge as one of the biggest winners in the race.
Though many firms, most notably Alphabet (
NASDAQ:GOOGL
) (
NASDAQ:GOOG
), have been working on AI innovations behind the scenes, it's consumer-facing generative AI that's making the public very excited.
Indeed, it can be hard to visualize how AI will change the world until you have the means (text-based prompt) to interact with it. For those who've tested AI's capabilities, it's clear that AI is more than just another hype-based tech trend, like
cryptocurrencies.
For now, though, I am neutral on Nvidia stock. While I'm amazed at the firm's expanding total addressable market (TAM) and recent innovations, I find it hard to hit the "Buy" button after a
~90% year-to-date gain. Still, the stock is worth considering on a pullback.
It's Not All About ChatGPT. Visual AI is Also Promising
These days, OpenAI's ChatGPT gets virtually all the attention. You'll probably hear about it at the local coffee shop or around the water cooler. Your employer may already be looking to the technology as a productivity enhancer.
Like OpenAI, Nvidia, and Adobe (
NASDAQ:ADBE
) are making major strides with AI but tailored to applications beyond just search. Most notably, both firms are investing heavily in the visual applications of AI. As most other investors look to Microsoft (
NASDAQ:MSFT
) and Alphabet as ways to cash in on the AI race, I'd not neglect the other blue chips (and smaller AI pure-plays) that also have plenty of skin in the game.
Even as numerous intelligent folks, like
Elon Musk, push for firms to hit the pause button on their AI development, I don't think there's stopping the race. The genie has been let out of the bottle, and it may be a tough task to put it back in.
If anything, the AI race will probably speed up from here as many tech companies look to invest heavily in their AI capabilities to catch up to the likes of the current leaders.
At this juncture, OpenAI looks to be commanding the lead. That said, it's likely just a matter of time before other capable firms aim to "one-up" its offerings. In such a race, things can get messy, and it's possible that a pause or accelerated regulatory action will be implemented in time.
While ChatGPT gets all the praise (and concern for those worried about the downsides of next-generation generative AI), creative deep-learning models, like Dall-E, are also deserving of investor attention. Personally, I believe "visual AI" (think AI-generated images, videos, and 3D assets) could be as much of a needle mover over the next five years.
In that regard, firms like Nvidia and Adobe deserve every bit of respect that Microsoft or Alphabet command at this very early point in the AI race.
Nvidia: Spreading Its Wings Across the AI Market
Nvidia is an all-around AI behemoth with impressive hardware that helps power generative AI technologies like ChatGPT. It's not just the way to play the hardware side, though. The company has been growing its presence in AI for quite some time.
At Nvidia's GTC (GPU technology conference) keynote, CEO Jensen Huang shed light on some incredible technologies that next-generation AI will help power. Indeed, it was hard not to get excited after gaining a glimpse of the creative applications made possible by a cloud-based AI service like Nvidia Picasso.
The Picasso platform takes the "wow" factor a step further than Dall-E, in my opinion. Not only can simple text be used to generate high-quality images, but it can also generate video and even 3D models. The magnitude of the capabilities of the platform seems nothing short of profound. Unsurprisingly, Nvidia stock rallied after the conference.
Is NVDA Stock a Buy, According to Analysts?
Turning to Wall Street, NVDA stock comes in as a Moderate Buy. Out of 36 analyst ratings, there are 27 Buys, seven Holds, and two Sells. The
average Nvidia stock price target is $280.56, implying 4.2% upside potential. Analyst price targets range from a low of $175.00 to a high of $350.00.
The Bottom Line
Now, Nvidia stock has always commanded a premium valuation relative to the semiconductor industry and the overall market. After all, the company had its foot in the door of so many emerging corners of the AI scene for quite some time now. Further, it has a visionary founder-led leader Jensen Huang and an innovative pace that's tough to keep up with.
At writing, Nvidia stock trades at 158.4 times trailing price-to-earnings (P/E) and 25.1 times price-to-sales (P/S). That's above and beyond the semiconductor industry average of 61.2 and 10.6 times, respectively.
As Nvidia continues making a splash on the software side, I do view a considerable premium to the peer group as warranted. However, given how many euphoric investors have been chasing the name in recent months, I'm in no rush to get in the stock.
There are cheaper ways to expose yourself to creative AI. At this juncture, Adobe stock seems like a much better value for money while it trades for a more palatable 37.2 times trailing P/E. The company has its own visual AI innovation (think Sensei and Firefly) and a partnership with Nvidia to co-develop AI models.
Despite this, you'll get a lot more in the way of growth potential from Nvidia. However, whether the higher price of admission is worthwhile is up for debate.
Disclosure
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