Nvidia (NVDA) shares are rising in after-hours trading after the semiconductor giant beat first-quarter profit expectations and announced a 10-for-1 stock split. Lou Basinese, President and Chief Market Strategist at Public Ventures, joins Seeking Trends to break down the revenue breakdown and analyze how long the company can maintain its momentum.
Despite beating Wall Street expectations, Basenese emphasized that NVIDIA beat expectations by about 8%, the lowest percentage on record. He cautioned that, “At some point, NVIDIA's expectations will far exceed its capabilities, but that hasn't happened yet.”
“I think they're a front-runner to be the next $3 trillion company, but if you had money to spend today and you wanted to make it 10x, it wouldn't be NVIDIA. It would probably be on the small-cap side of the market,” he added, saying that of the Magnificent Seven, Alphabet (GOOG, GOOGL) was the most “reasonably valued.”
Basenese said Nvidia's stock split is a “great psychological move” because it makes it more attractive to buy shares at a cheaper price. He added that this doesn't change Nvidia's fundamental metrics or value calculations.
For investors looking to get into the AI space, Basenese highlights Microsoft's (MSFT) ability to bring AI products to market to create demand. He also points to Apple (AAPL) as a “hidden AI stock.”
“Apple seems to be perceived as missing the boat…They were never first or second in the market. “Eventually they become leaders.'' He added: “They have 2 billion active devices. Just by iterating and adding a little bit of AI somewhere, the impact is even bigger.'' added.
For more expert insights and the latest market trends, click here to watch the full episode of Seeking Trends.
This post was written by Melanie Leal
Video Transcript
The company also announced a 10-for-1 forward share split and will increase dividends by 100% and 50%.
Only NVIDIA is talked about in the market.
The company has added more than $1 trillion to its valuation this year.
Thanks to its skyrocketing stock price, it is now the third-largest company in the United States, with a market capitalization of over $2.3 trillion.
Cent is a phenomenal value and has fuelled expectations, but some say they have perhaps been too aggressive here.
Joining me now is Strauss Lu, President and Market Head, M DB Capital, Lou Bassinet. He is always happy to meet you.
I'm happy to be here again.
So let's start with the video report.
Lou, we were talking about this off camera, it's up 90% since the beginning of this year, right?
And really, everyone is in the same boat.
90% of analysts told me it was a must buy.
It rose a further 2.6% in after-hours trading.
What do you think about this report?
Give me 10% of you.
I am forever a contrarian.
He always tried to keep me out of this.
But if you look at this report, you can liven up Wayne's World with Maud Garth's party.
So, there's nothing wrong with this report, so let's go.
I think the risk of having to find something outweighed the reward.
Expectations are the lowest, at around 8% so far.
If you look back a year ago when they reported their first explosive quarter that kicked off the AI hype machine, it was up about 40%.
So I think at some point the expectations will go far beyond what NVIDIA can deliver, but that's not the case yet.
So they're not in it because of valuation concerns, and that's going to be brought up when there are skeptics on the show.
Is there a more comfortable level for you?
Look, if I had to be rational, I would say yes, right?
Valuations were completely crazy until the company grew.
Currently, the forward P/E ratio is approximately 40 times.
If you look at Microsoft and Apple, it's probably in the low 30% range. I think that makes sense for a company with a market capitalization in the trillions of dollars. You have to remember, right?
There is an opportunity cost.
How high will this market cap go?
In other words, Apple achieved 3 trillion yen sales last year.
That's already two trillion.
You're thinking about Microsoft joining the $3 trillion club.
So, I think it could be a prime candidate to become the next $3 trillion company.
But if you have a dollar to invest today and you want a 10x dividend, it's not NVIDIA.
right.
It's probably on the small-cap side of the market.
Or if you want to see 7th magnitude stars, you would be more conservative.
In other words, Alphabet is the most rationally valued in the future.
Is it possible to find out about stock split news other than the bottom and top prices?
What should I bring there?
I think this is a great psychological move. Because if you look at the current data, about 40% of the trading volume in recent months has come from retail investors.
So this is a great way to psychologically attract more retail.
This means that the basic metrics and valuation calculations remain unchanged.
But if I'm sitting there thinking about buying 100 stocks or one stock, $100 is a lot easier and more acceptable than $1,000.
What do you think?
We'd also like to know your take on this report as well as what it means for NVIDIA and Jensen WW.
What is the ripple effect?
Impact on the broader market?
Huge.
In other words, I believe that when technology moves, the market also moves. In other words, 40% of the S&P 500's rise comes from the technology sector.
Well, if not more so, looking back historically it's similar to the days of .com.
So this was what we needed, right?
So, this is a leader in AI trends, but we should have expected it.
As you can see, if you look at the earnings reports of Microsoft, Amazon, Google, you're seeing cloud revenue acceleration, which means NVIDIA's chips are being pulled into the market, right?
That's how it's promoted.
So, okay.
So what were you doing with the silence and the video, you stepped in and you were concerned that maybe it was too expensive, but you wanted to play the AI theme, so where else were you looking?
I think Microsoft is more reasonably valued.
This means you need to do your own due diligence.
But the main difference with Microsoft is that Microsoft can push AI into the market, right?
Because they are making a product, they can create demand.
NVIDIA is starting to enter the market.
I think Apple is a hidden AI.
That's interesting.
You are right, Apple is a sleeper.
We actually talked about it.
Looks like little Apple missed the boat, doesn't it?
Everyone was racing and being left behind.
You don't think so.
Looking at Tim Cook's resume, you wouldn't think so, would you?
Everyone assumed he would miss out after he joined Apple as Steve Jobs' successor and continued the tradition.
They are never first or second on the market.
They come in later and end up being the leaders.
And this is a key differentiator for Apple.
There are 2 billion active devices in use.
If you just iterate and add a little AI somewhere.
It has a magnified influence on the royal satisfaction group.
Um, and, you know, I always think about Apple, you know, Tim Cook controls the software and the hardware that gets shipped, right?
It's vertical integration.
When he decides he wants to take action, he can flip the switch in a flash.
So are you looking forward to Apple's Software Show?
Is that the kind of catalyst you're looking for?
Well, I think this is the first step for Apple, but it's going to continue to overwhelm people on an ongoing and permanent basis, right?
Apple is in the midst of such sentiment that no one believes they can pull off a miracle and become the leader again.
Well, I think now is usually the time to buy Apple.
Historically, I've been full disclosure, I own it.
We do not engage in investment banking services.
But looking at where we are now, in the middle of the summer doldrums, getting closer to the holidays has historically been a good time for Apple to time the market during the summer.
Well, the other one, namely NVIDIA, is too expensive, so it's one of the company's chip names.
I really think Arm Holdings coming back to the market is an attractive opportunity as a publicly traded company that will give it leverage over whatever the next semiconductor trend is.
They're moving into A, and I think pretty aggressively, they have a much more attractive recurring revenue model than NVIDIA's one-time sales model.
Um, if you want to go, do you, um, you also say, obviously, you think the ratings are more appealing to you?
It's still a little early, but I think it will continue to grow.
Just as NVIDIA has grown to its valuation, we will see growth as well.
I think Arm has the potential to do that.
It's also a new company, right?
It has been removed from the market.
Um, if you want to go, I like specific AI applications.
So, this is full disclosure.
I put it in the bank.
I don't own it, but the company owns it. Well, it's a heart beam.
It's a portable, credit card-sized device that can detect heart attacks, and new data shows it can do it better than human cardiologists.
So I get more excited about undervalued small-cap stocks that are really innovative and have real applications of AI.
And I think that's really what provides the greatest benefit. Because we'll see if AI really makes a difference in saving our lives, or if it helps kids cheat in school and save a little bit of their grades.
right.
So this one, it doesn't, doesn't have a long term sustainable business behind it, but other applications are always welcome to you.
Choose a strategy.
thank you.
thank you.
