Nvidia (NVDA:NGS) — Choosing To Sit This One Out

Nvidia: Choosing To Sit This One Out

  • Nvidia is a wonderful business.
  • It is a top designer of GPUs for the PC-gaming and Professional Visualization markets. It also continues to deliver exceptional growth in Datacenter due to the rise of “GPU Computing”.
  • But take heed of forecasts that Nvidia is the “it” company for machine-learning! The future is decidedly ASIC and it remains questionable whether GPUs will power the next-generation of AI.
  • The proprietary CUDA API is the difference between a generational growth stock and a bubble.
  • Idiosyncratic growth has been beyond impressive, but risks abound. I choose to sit this one out… an active decision.

 

The Good, the Bad and the Caveat

Let me start by saying that Nvidia (NVDA:NGS) is a wonderful business. The company has maintained a leading franchise within the high-end PC graphics card market for almost 20 years. It dominates the market for Professional Visualization with engineering CAD-software renderings; and it continues to deliver on its outstanding growth from Datacenter due to the secular trends in cloud computing and machine learning.

It has leveraged this growth into an enviable financial profile. The company’s earnings growth has resembled that of a hockey stick, while its balance sheet remains exceedingly strong. It is still firing on all cylinders as it maintains a cadre of top-notch engineers being led by its visionary founder; and it appears poised to exceed relatively pacified growth expectations through at least the rest of this year.

So, I understand what the fuss is about. I see the reason pundits such as Cramer, the brothers Najarian, and the investment public at large continue to fawn over it. But Nvidia has also turned into the “can’t miss” stock of a “can’t miss” technology boom.

Yet risks abound as the company is a prime beneficiary of hype and misunderstanding. The untold stories of the CUDA API, matrix multiplication, and the Fourier Transform, which are aspects not readily discussed by cheerleader sell-side research reports and on networks such as CNBC.

These are abstract concepts for a retail investor base that still largely believes thread-counts have more to do with bedding than machine learning.

This is not an indictment though. I am not short. I am not long. I have no horse in the race. I merely find the company to be un-investable at current price levels for the non-speculator; and have simply decided to sit this one out.

So why publish at all then? What’s even the point?

Because clients, friends and family seem to ask about it every day… and because I no longer have a choice.

Sitting this one out has become an active decision…

— — —

https://seekingalpha.com/article/4085429-nvidia-choosing-sit-one

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