Editor’s Note: Today, Executive Editor Chris Reilly sits down with Stephen McBride to discuss Nvidia’s (NVDA) recent drop after becoming the world’s largest company… and where to invest in the artificial intelligence (AI) megatrend.
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Chris Reilly: Stephen, we need to talk about Nvidia again.
After becoming the world’s largest company last week, it’s fallen. NVDA’s now sitting in the #3 spot behind Microsoft (MSFT) and Apple (AAPL).
In fact, it just suffered the biggest three-day loss in market value in history, wiping out $646 billion in market cap.
Yahoo Finance calls it an “absolute bloodbath.”
Stephen McBride: The stock fell 13% over three days before yesterday’s nice rebound. The journos can call it a bloodbath or whatever big, scary word they’d like. But you have to remember how Nvidia got here... It’s truly been a run for the ages.
The stock is up more than 750% since the beginning of last year.
It was a $1.5 trillion company five months ago. It’s worth over $3 trillion today. We’re dealing with BIG numbers here, which magnifies the recent drop.
But this is normal and expected. NVDA was due for a breather.
In fact, as I said during our last talk, while the company’s stronger than ever... caution is warranted from a sentiment perspective (how investors are feeling and acting). I said a mood change was all it would take to drop NVDA’s price by 30%. And that would be a buying opportunity.
Chris: You recommended NVDA in 2020 in your Disruption Investor advisory and have taken profits twice. Subscribers are up 410% with their remaining small position. What’s your guidance now?
Stephen: Since we took profits on the way up, we’re more than happy holding on to our small, risk-free position because there’s a ton of upside left. I see NVDA eventually hitting $10 trillion and beyond.
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It will continue to be a clear winner of the AI boom. That’s because it’s the #1 recipient of the huge sums of money being spent on the AI buildout.
NVDA’s meteoric rise has shown once again that great businesses profiting from disruption can go higher than you can possibly imagine.
All that being said, there are simply much better opportunities to profit off AI right now.
Chris: Such as?
Stephen: In Disruption Investor, my partner Chris Wood and I are focused on the other parts of the AI data center buildout.
Microsoft, Amazon (AMZN), Google (GOOG), and Facebook (META) will spend over $170 billion this year alone building data centers.
Data center spending is expected to top $200 billion in 2025. And analysts expect the global capacity of hyperscale data centers to grow 3X over the next six years to meet the world’s AI needs.
While Nvidia is the most well-known winner from all the money being thrown at data centers today, it’s far from the only company profiting.
I expect a lot of spending and innovation to shift toward the lagging parts of the data center equation: cooling equipment, storage, next-gen fiber optic cables, and so on.
We highlighted four of our favorite AI buildout stocks in this month’s Disruption Investor issue.
One is the king of data center power and thermal management.
Another is the only company in the world that manufactures the Nvidia-designed high-speed networking cables and optical transceivers needed for AI.
Members can read about the others in our latest issue.
Chris: Any other areas you’re looking at besides the data center buildout?
Stephen: Soon, you’ll read about AI energy shortage.
See, AI models suck up a huge amount of power. Training the original ChatGPT used the equivalent of a high-performance supercomputer running continuously for nearly 14 years.
And now multiple companies are building gargantuan clusters of 100,000 Nvidia chips that are all linked together.
This is why Amazon recently bought a nuclear power plant in Pennsylvania and why Microsoft is quickly moving into atomic energy. Everything tells me powering AI could be among the biggest investing opportunities over the next decade.
We’re doing more analysis on this idea, and Disruption Investor members will be the first to hear about it.
Chris: Thanks, Stephen.
Stephen: Anytime.
Chris: And reader, if you’re ready to get Stephen and Chris’s in-depth AI research and picks, you can upgrade here.