This isn't a post about AI bubble or why the chip and cloud hardware supplier is on a nutty uptrend. Their revenue in cases like NVDA has grew 120%+ YoY with insane profit margin, and since market is short sighted, it makes sense why the insane run. Lot of people kicking themselves for not see this coming, or someone like me who saw it coming but exited earlier because couldn’t value the “shovel” correctly in this gold rush.
Now lets take a step back and look at this trend from a different angle. Main buyers are the big 5 Google, OpenAI, META, AAPL, AMZN, MSFT (GOMAM).
In order for your you all to understand my next points we all first have to agree on few basic things
1). Companies have FINITE capex amount
2). Every company at the end of the day WANTS to make money
3). Every company wants to find a way to REDUCE their capex and still grow
For point #2, the way these company will eventually make money is by selling the products to consumer and business. So in next 5-10 years we will see leap in software and services innovations. We will see so many new small and midsize companies using these applications to build more complex solutions on cloud. Now take your guess who will benefit the most from this? if your answer is GOMAM, thats correct. If your answer is NVDA then you are an idiot.
I would say point #1 and point #3 go hand in hand, we are seeing lot of capex diverted within the company itself. So to no surprise, GOMAM are already building and some have built their own silicon. Its just matter of time when they start to reduce their exposure to external company. This isn’t to say that NVDA will ever become irrelevant. The point is they will always have to outgrow and justify for GOMAM to spend their capex on them. This is the bet you are making for going LONG nvidia at these valuation. Because again, market is short sighted, they are seeing 6-12 month guidance and pumping.
Now i am seeing crazy amount of doom and gloom for companies like AAPL and GOOG lately on reddit and also on media. I just have one question, that goes to #2. How do you guys think every software and services that will leverage these new silicon will reach the end users? Think for a second form a consumer standpoint. They don’t know wtf is NVDA, AMD. All they know is smartphones, tablets, wearable, laptops. I am not saying where you should invest your money. I am just saying don’t go with the trend like a madman. if you miss the shovel rush, you can still make plenty of money on factories that will make gold products for end users.
in summary,
I see there is more value in going long on GOMAAM (Added AAPL) than NVDA,AMD
