Last night my wife presented an investment opportunity to me - NAHVID AI. She doesn't pay a lot of attention to investments, but does have some holdings which she usually makes based on a subjective / qualitative sense of management reliability, and corporate governance and culture, which pairs with a believable narrative of the business.
Against this framework, she laid out the case for investing in "a company which makes computer chips" which she has observed to be doing quite well lately. Importantly, she's noticed that they are making chips serving the AI industry, and "that looks like its going to be a big deal, probably even bigger than we think right now". The management seem believable, and she's read that they've probably got the best chips for AI.
At this point, I'm curious and I probe a little further until the penny drops - she's talking about NVIDIA.
Because I am not very smart, I didn't even try to hide how funny I thought it was that she was presenting the AI thematic and the 3 trillion dollar company behind it. I'll be paying for that for a while.
But on a second glance, NVDA is actually quite reasonably priced. Factoring in slowing growth over the next 2 years, the forward PE is pretty reasonable. Its been on such a tear that I've always assumed it was an overpriced momentum trade, and because I usually shop in the small end of town, looking for mis-priced small cap opportunities, I've never taken a good look at it.
After I stopped laughing, she shrugged and said "well anyway, there's also this thing called AMD and I think they're a number 2 that will always try harder". A large part of her portfolio is in CBA, so she's outperformed me this year hands-down. So what the hell do I know?
My takeaways: