Mad Hedge Technology Letter
April 3, 2023
Fiat Lux
Featured Trade:
(BULL CASE FOR NVIDIA)
(NVDA), (AI), (GPU)
Mad Hedge Technology Letter
April 3, 2023
Fiat Lux
Featured Trade:
(BULL CASE FOR NVIDIA)
(NVDA), (AI), (GPU)
Investors looking at taking their investing futures by the scruff of the neck need to look no further than pouring capital into chip stock and a company that will be integral in building generative artificial intelligence technology Nvidia (NVDA).
The stock has muscled itself higher in 2023 doing a double in about 4 months.
Shares were languishing around $140 at the turn of the year, but have gone ballistic on its way to almost $280.
What was the trigger to such a short-term bull run?
Investors have bought into the hype around generative artificial intelligence (AI) applications such as chatbots, which could trigger the need for thousands of graphics processing units (GPUs) - a market that's dominated by the chipmaker.
But the stock's extraordinary rally has made it quite expensive from a valuation perspective.
Sadly, PC shipment forecast is grim as well for 2023. PC shipments this year expect to come in at 260.8 million units, which would be a 10.7% decline over last year.
Nvidia sells graphics cards that go into personal computers and workstations.
The PC market's woeful performance in 2022 - when shipments declined a startling16.5% from 2021 - led to a collapse in Nvidia's gaming and professional visualization segments. Gaming revenue was down 27% in fiscal 2023 to $9 billion as sales of graphics processing units (GPUs) used by gamers dried up. Professional visualization revenue also declined 27% to $1.54 billion.
Nvidia's channel partners were left with excess graphics card inventory on account of weak demand.
Revenue is expected to increase by almost 10% to $29.6 billion, but a gloomy forecast indicates that the restocking of graphics card inventory may not happen soon.
The headwinds in a sizable chunk of Nvidia's businesses, when combined with its rich valuation, strengthen the case against investing in the company.
New catalysts such as generative AI applications could give the data center business a turbocharge effect.
For instance, market research firm TrendForce estimates that ChatGPT may eventually require more than 30,000 GPUs from Nvidia to cater to the huge demand. Given that each Nvidia data center GPU can cost between $10,000 and $15,000, the company could generate substantial revenue from supplying its graphics cards for powering chatbots such as ChatGPT.
Also, as many tech giants are now in a race to develop chatbots, Nvidia could turn out to be the biggest winner related to this industry.
That's because Nvidia leads the data center GPU market, with a share of over 90%. That puts it in pole position to take advantage of the chatbot market, which is expected to register annual growth of 30% over the next five years.
The bottom line is that the AI opportunity could send Nvidia stock higher in the long-term.
They continue to be one of the leading lights of the tech industry intersecting across a number of leading and meaningful sub-sectors.
However, I would wait for a small dip to dollar cost average into shares because the price action has gone a little too fast and too furious in the short-term.
Mad Hedge Technology Letter
February 1, 2023
Fiat Lux
Featured Trade:
(5 STOCKS FOR THE UPCOMING A.I. BOOM)
(NVDA), (AMBA), (MBLY), (AI), (AYX)
There has been non-stop talk about how ChatGPT is reimagining the tech sector.
The highest quality artificial intelligence chatbot to ever grace the earth is scaring tech executives around the world.
My personal discussions with people in the know are that every tech company is now forming a work group and assembling its best engineers to figure out how to get their hands on something similar.
That being said, here are five companies that will benefit asymmetrically as this chatbot tech goes from fringe to mainstream.
Buckle up with your cowboy hat because this type of technology will become pervasive in no time.
Since the cutting-edge chatbot was launched, there has been a massive re-rating of A.I. stocks because of the legitimacy of the technology.
It definitely appears that chatbot AI will finally live up to the hype.
On November 30th, OpenAI Chat introduced GPT and has since shown that the software can be used in everything from writing stock reports to resignation emails to messages for dating apps
Nvidia (NVDA), famously known for designing and manufacturing graphics chips, is the first stock that goes off the top of my head to benefit from this new AI craze.
The company's technology is being used for various AI integrations from self-driving cars to robots.
Nvidia's CEO Jensen Huang is one of the better leaders in Silicon Valley.
Recent forecasts estimate that a boom in Chat GPT usage could bring Nvidia revenue of between $3 billion and $11 billion over the next 12 months.
Success of Chat GPT brings Nvidia a potentially significant boost in demand for computing power.
New Nvidia chips are benefiting from the large computing requirements of AI tools such as ChatGPT.
Ambarella (AMBA) is another chip company powering the AI market. It develops semiconductors used in everything from in-car entertainment consoles to cell phones.
AMBA chips are also specifically used in self-driving cars, and the company recently partnered with German auto parts maker Continental for a joint autonomous driving project.
Mobileye (MBLY) was spun off from Intel and focuses on autonomous driving technology and driver assistance systems, which include chips and cameras. Volkswagen, Ford, and GM are among the company's customers.
Mobileye SuperVision is the top AI product at MBLY and is the most advanced driver-assist system on the market, providing “hands-off” navigation capabilities of an autonomous vehicle and designed to handle standard driving functions on various road types, while still always requiring the driver's full attention and eyes on the road.
C3.ai (AI) is a provider of software solutions in the field of artificial intelligence and owes its recent share price increase to the success of Chat GPT. Upon the announcement alone, shares rose about 28% when it was announced that Chat GPT would be integrated into its product range.
Alteryx software (AYX) is best known for data and analytics. The company is also involved in automation and specializes in artificial intelligence integration, albeit to a much lesser extent than competitors like Google and Meta.
There are rosy days ahead for AI stocks that will attach their fortunes to one of the most important trends in Silicon Valley.
Mad Hedge Technology Letter
September 18, 2020
Fiat Lux
Featured Trade:
(HOW WILL ARTIFICIAL INTELLIGENCE AFFECT YOUR LIFE)
(AI)
Artificial Intelligence is something we as a society, economy, and individual simply don’t talk enough about.
The point we find ourselves at today is disappointing.
Artificial intelligence is mainly controlled by the big corporations and big governments.
How is it being applied?
Largely through spying, surveillance, and digital marketing.
Digital marketing is the only one that really hits home because we are constantly bombarded with predatory ads that manipulate consumers into buying goods we don’t need.
As artificial intelligence becomes more widespread and cheaper to apply to everyday microeconomic situations, our workforce will transform into something that we could have never fathomed.
What does that mean?
Job losses and a tidal wave of automated jobs will come to the fore.
With the pandemic ravaging job prospects, white-collar professionals have lucked out being able to loaf around the office, stroke a few keys, and get paid.
Well, massive job displacement won’t come for these professionals yet, but once artificial intelligence improves by a factor of 10X,100X, 1000X, 10000X than the average human, then job losses will reach higher up the job chain and arrive like an avalanche.
There are few hideouts from the robots, examples can be found everywhere such as accountants have a 95% chance of losing jobs in 20 years and 35% of legal sector jobs could be automated in 10 years.
Intelligent agents and robots could replace 30% of the world’s current human labor.
AI systems are already replacing human stock pickers, turning banks into human-less cloud centers running on algorithms that can analyze information from markets, social media, corporate filings, and economic conditions to quickly decipher trades. These systems can trade better than any human.
A London School of Economics study showed that 40 million manufacturing jobs around the world could be replaced with robots by 2030. Each robot impacts 1.6 jobs, with lower-skilled regions seeing a higher impact.
The only way humans will be able to get a foothold in the future job market is to merge with robots and become a super worker being able to tap into the deep reservoir of knowledge that artificial intelligence pools together.
“Augmenting humans” is a scary thought in 2020 but in 10 or 20 years, it could become the only means to survive or the only way to be competitive.
Enhanced productivity leads to economic growth, which in turn can fund new job creation opportunities and this enhanced productivity will be led and influenced by AI.
A University of Tokyo study involving 1,500 companies shows that significant performance improvement is experienced by firms which combine the forces of human and robot.
Man and AI can collaborate to enhance each other’s complementary strengths: leadership, team spirit, creativity, and social skills of the former, and speed, scalability, and data crunching techniques.
Also, technological advancements are propping up new areas which did not exist before like big data analysis, data security, decision support analysis, predictive analysis.
Data scientist was a job that didn’t exist 10 years ago, but today almost every business, from consumer brands to online pharmacies, needs data scientists to interpret customer data to design product and marketing strategies.
Around 50% of surgeons will be replaced in 20 years substituted by robots who are precise to the millimeter removing any remnants of human error.
Technology is being increasingly used to support doctors – whether it is retrieving digital records or using data analysis for diagnosis.
The “human touch” could almost become completely erased in healthcare giving way to robots being the brains of the operation and humans as assistants to lend a face to the business.
Then as AI develops, it could fork into different types of AI.
At some point, AI might be able to think for themselves, achieve consciousness, conceptualize, and do complex strategic planning or make decisions based on emotional intelligence (EQ).
Robots will eventually deal with situations where there is an absence of data and feel or interact with empathy and compassion.
Granted, we are nowhere near this last developmental stage of AI but it's food for thought while humans battle the first wave of job losses with primitive AI robots who can’t understand how you feel.
The ultimate decision that humans will need to make is if they are willing to eventually become part robot to survive.
I believe young people will jump at the chance to forge ahead a new career and ride a wave of momentum to get a leg up on the competition because they have the rest of their lives ahead of them.
Pensioners might be averse to joining the youth because they rather enjoy their last years instead of hooking up to a network of infinite data.
Do not forget that when AI is finally fused with the human brains, these humans will be able to creatively think, problem-solve, collaborate on a level that the prior collection of humans together could not compete with.
In the short-term, job losses will deepen as the world becomes overpopulated and AI isn’t mature enough to offer legitimate meaningful solutions yet.
Sometimes the economy has to go 1 step backward to go 2 steps forward.
In the next few years, we will experience the full force of digital marketing as the industry milks the last drops of what it can before that industry finally changes.
The same goes for devices like smartphones and iPads, they won’t exist in 10 years because they will be replaced.
Investors need to keep in touch with the developments of AI because seismic shifts could mean certain tech companies are deemed obsolete going forward.
In either case, software is the future, and AI and whatever framework replaces physical devices will need more software and better-quality software.
Therefore, I recommended finding the best software companies and just buying and holding because they will be part of any new tech revolution and most likely an oversized participant.
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