Not one of these bubble-come-lately types, no siree.
June 18, 2024: Nvidia's Financial Dominance (NVDA)
For the last year we have been referring to the AI phenomena as a bubble, perhaps not so much in financial terms but rather in terms of the psychology, the speculative frenzy. It's true in Nvidia's case, the stock could be cut in half and still be discounting the future with a 2-3% discount factor i.e. 33 to 50 times free cash flow.
However! Despite this we have been pitching a "Ride the Bubble" approach to the stock for over a year (we have an almost full decade with this one but it was in the last thirteen months that we thought it bubblelicious). Here's a July 1, 2023 post:
....So, we are faced with the decision whether-or-not to play a dangerous little game, riding the bubble knowing full well it is a bubble, or retiring to the sidelines.For now one of our favorite economists with one of our favorite stories.
Here's the version hosted at MIT:
This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare’s Bank, a fledgling West End London bank, knew that a bubble was in progress and nonetheless invested in the stock: it was profitable to “ride the bubble.” Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by such institutional factors as restrictions on short sales or agency problems...
The two most important parts of the paper "II. Hoare’s Trading Performance" and "III. Causes of Success" are definitely worth a couple minutes....
*****
....We'll have more on the big stories, autonomous vehicles, agentic AI and humanoid robots later today.
Mr. Huang believes they are each trillion dollar+ addressable markets.*We reiterated the ride the bubble pitch a few more times, despite some trepidation.note: stock prices should be divided by 10 to adjust for the most recent stock split.January 19, 2024 at $594.91 "AI: Lessons From The South Sea Bubble".
February 6, 2024:
The stock is down $11.87, so a little less than half yesterday's up-move. $681.45 last after trading as low as $663.00 (down $30.31 and almost the entire Monday $31.72 up-move.) Unfortunately there is a gap on the chart at $660 so it didn't completely fill. Nervous-making....By-the-bye, that $660 ($66, new style) is the "cut in half" number.
March 6, 2024:Earlier this morning the stock got to $889.68 and we are still pitching the "ride the bubble" approach—up $220 since the last mention, Feb. 6—but that could change anywhere between today and the end of the NVDA GTC conference (Mar. 21)....If interested in some of our history with the big dog there are links embedded in January 2024's "Nvidia expands its reach in China’s electric vehicle sector" (NVD
As reiterated in January 7 2025's:
"Everything (retail) Nvidia Announced at CES 2025"
Reminder: We believe AI is a bubble and have made the decision to ride the bubble....
Finally, as Adam Smith put it in his book on the 'sixties bull market, The Money Game:
“Now you know and I know that one day the orchestra will stop playing and the
wind will rattle through the broken window panes, and the anticipation of this
freezes us. All of these kids but one will be broke, and that one will be the multi-
millionaire, the Arthur Rock of the new generation. There is always one, and
maybe we will find him.”
—As seen in February 2024's "JPMorgan's Jamie Dimon On The Business Case For AI: "This Is Not Hype" (JPM)"
Not being in government, I don't have the authoritarian type of authority so I tend toward Burkeian humble and lovable:
His unbiased opinion, his honest advice, and his best reasons."
—Edmund Burke (1791)*
—Power Politics For Outsiders, March 2023 (and elsewhere)
*Potential downside: Burke was described by Edward Gibbon (he of The...Decline and Fall...) as:
"The most eloquent and rational madman that I ever knew".
