Sell ​​Nvidia? – Outsider Club

I still remember the first time I saw Usain Bolt run. I don’t know if it was at the Olympics or some other event. I couldn’t tell you if it was a 100-meter or a 200-meter race.

I remember sitting there with my mouth open and thinking: “A human being shouldn’t be able to do something like that.”

This still from a 200-meter race in 2009 sums it up:

These are all world-class sprinters. Usain Bolt destroyed them. It shouldn’t be possible to be that much better, but that’s the way it is.

Such a feat shouldn’t be possible. That’s the only parallel I can think of to Nvidia’s (NASDAQ: NVDA) performance over the past few years. Such a feat shouldn’t be possible…

I know this sounds far-fetched. There are plenty of companies that have grown at breakneck speed, right?

Not really. Not like Nvidia.

In 2022, Nvidia generated revenue of $26 billion. Last year, revenue doubled to $60 billion. By the end of 2024, Nvidia will have doubled its revenue again – to $120 billion. Revenue estimates for 2025 are up to $205 billion.

There has only been one company in history that has managed to record revenue growth of over $50 billion from one year to the next – Apple (NASDAQ: AAPL). In fact, Apple increased its revenue by $90 billion from 2020 to 2021 – from $274 billion to $365 billion.

No wonder Apple and Nvidia are vying to be the most valuable company in the S&P 500…

Sell ​​Nvidia?

According to Bank of America, Nvidia “…still only in the second year of This could be a three to five year deployment cycle and represent around $300 billion in long-term opportunities.”

BofA expects the stock to peak at $150.

But what then? What happens when we reach the end of the “three to five year deployment cycle?”

The problem for Nvidia is the same as for a world-class sprinter. Both will slow down at some point. At some point, the huge expenditure on building new data centers and upgrading existing ones will be largely spent.

It’s worth thinking about what will happen to Nvidia’s stock price between now and when growth slows. According to Bank of America, Nvidia still has a $300 billion opportunity. Revenue could double again. And Nvidia’s profit margins are over 50%…

Nvidia currently has $20 billion in net cash. It’s not unreasonable to assume that by this time next year the company could have $60 or $70 billion in cash. And then? Maybe Nvidia will start paying a massive dividend? Maybe the company will make a big acquisition or two?

There are a lot of “what if” questions for Nvidia. Many of them are positive.

But from a long-term investment perspective, I like the fact that there aren’t many “what ifs” for Apple.

Apple vs Nvidia

You may notice that Nvidia had a pretty good day today, gaining about 6%. Apple, on the other hand, struggled to gain 1%. If you’re looking to make quick gains, Nvidia may be the better stock.

Still, there’s a pretty good argument that Apple will outperform Nvidia over the next 12 months.

For one thing, with the release of its new iPhone line, expected in the fall, Apple could be at the start of a highly profitable upgrade cycle.

Plus, Apple’s cash flow is already much larger than Nvidia’s. And Apple is a consumer-focused company, meaning revenue from newer, better, faster phones should be more stable than Nvidia’s dependence on other companies’ capital spending.

And then there’s the data. Data has become a key input for AI companies, and Apple’s influence over every aspect of its customers’ activities is a treasure trove.

Nvidia won’t report its results until late August, so you can bet investors will be asking, “Can they do it again?” “Is this the quarter where growth slows down?”

In fact, I expect the growth worries to increase before each quarterly report until Nvidia actually disappoints. If you’re OK with that, that’s fine with me. If you’d rather not worry, Apple is the way to go…

Bon Voyage,

Brit Ryle
Chief Investment Strategist
Outsider Club

Twitter: https://twitter.com/BritonRyle

You May Also Like:

Hammer went camping

https://www.outsiderclub.com/iii-möchte-ich-retter-sein

Maybe I was too optimistic about stocks this year

https://www.outsiderclub.com/check-up-on-my-2024-predictions/

This nuclear stock has nearly doubled since our report in May

https://www.outsiderclub.com/jetzt-stromaktien-kaufen/