AI investors were caught off guard this week on news of China’s ChapGPT rival “DeepSeek”. It’s alleged DeepSeek was developed far more cost-effectively (millions vs billions) than OpenAI’s ChatGPT (and similar large language models). If true (and we don’t know) – this raises questions about the sustainability of current U.S. AI infrastructure investments – forecast to top $1 Trillion next year. All of a sudden – valuations for these AI stocks are being questioned.
NVDA
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NVDA: What Do You Pay for Growth?
2024 will go down as another great year for stocks in the trader’s almanack. However, what won’t be recorded is just seven stocks comprised ~54% of the S&P 500 total gains (~24% with two trading days remaining). It’s a bit like golf – you only need to record the final score – not how you did it. However, the how matters (not just the ‘what’). This post will address the question of what to pay for one the most popular stocks today – Nvidia (NVDA). The asking price is $137 at 32x forward earnings. But does that represent great value given its growth assumptions?
It Wouldn’t be September Without a Few Bumps
September has started in a very typical September fashion. Down! It’s traditionally the worst month of the year in terms of returns. But that’s not a bad thing… As longer-term investors – it’s great when things go on sale. That’s when we get to sharpen our pencils on higher quality businesses. And for those who missed out four weeks ago (where you needed to act fast) – it’s possible you will get another chance this month. As I wrote recently – the rapid 10% surge in equities over 4 weeks did not fill me with a lot of confidence…