NVIDIA’s $1 Trillion AI Opportunity Is Small Potatoes

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Green Zone Ratings

NVIDIA's $1 Trillion AI Opportunity Is Small Potatoes

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Adam O'Dell,
Chief Investment Strategist

Inflation is running hot … but $100 trillion is still a lot of money.

In a recent presentation to investors NVIDIA Corp. (Nasdaq: NVDA) CEO Jensen Huang said that his company was targeting industries with combined revenues of $100 trillion. And his company is addressing 1% (a full $1 trillion) of that enormous sum with its latest efforts.

A trillion dollars sounds so big as to be hyperbole. But Huang breaks it down like this:

  • $300 billion in sales to the auto industry.
  • $300 billion in chips and systems.
  • $300 billion in enterprise software.
  • $100 billion in the video game industry.

And the tie that binds together this diverse set of industries?

Artificial intelligence.


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Artificial Intelligence Is Ubiquitous

It’s not just for games anymore. Artificial intelligence — or AI — is now ubiquitous. It’s a critical component of some of the biggest investment themes of the next 20 years.

Autonomous driving requires AI. Efficiently managing modern renewable energy production and storage requires AI. Even genomics — another one of my favorite investment themes — requires AI for advanced modeling.

AI can’t replace human labor in a lot of endeavors. It might be a while before we have robotic barbers or dentists.

But leveraging AI solutions is a big part of resolving the global labor shortage, both by replacing some workers outright and by allowing other workers to be more efficient and handle more responsibility.

Just as AI is a critical component of a host of industries, NVIDIA’s chips are a vital part of the hardware that makes AI possible.

And you want to know if it’s worth buying some shares of NVDA after the chip giant’s blockbuster announcement.

Let’s see what my proprietary Green Zone Ratings system reveals.


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NVIDIA Is a Fine AI Investment — We Can Do Better

NVIDIA rates a “Neutral” 57 out of 100 on my Green Zone Ratings system. But it’s worthwhile to dig into the numbers because there is a much bigger story here than the composite score suggests.

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Growth — NVIDIA chips go into almost everything these days. This is obvious from NVDA’s stellar growth factor rating of 99. NVIDIA is in the top 1% of all companies in our universe in terms of growth. And with revolutionary new AI tech, I don't expect that growth to slow down.

Quality — My system measures quality objectively, using various measures of profitability and balance sheet strength. NVDA is near-perfect here as well, with a quality rating of 99. It has no weaknesses here and rates highly across its returns on equity, assets and investment. The company also maintains only moderate debt.

Momentum — I’m always looking for opportunities within market mega trends, and I like to buy high and sell higher. NVDA rates a respectable 75 on momentum. It’s common for high-growth stocks to also be high-momentum stocks. And to see some of that momentum in action, just look at NVDA’s stock chart. Over the last year, NVDA has gained 123%, even factoring in the tech sell-off that we witnessed earlier in 2022.

(Click here to view larger image.)

Volatility — Despite NVIDIA’s torrid growth, the stock isn’t that volatile. It rates a 49 on our volatility factor, which is average. Some of NVDA’s moderate volatility can be explained by its sheer size. Larger stocks often have volatility factors in line with the broader market.

Value — Tech stocks and high-growth companies are expensive these days. NVIDIA rates a 6 on our value factor. It’s an exceptionally high-growth and high-quality company. Investors are willing to pay a premium to own this stock.

Size — NVIDIA is one of the largest chipmakers in the world, with a market cap of $700 billion. It’s not a hidden gem at that size! It rates a zero on our size factor, which knocks several points off its composite score.

Bottom line: NVIDIA is a wonderful company and a good way to play the long-term artificial intelligence mega trend. But it’s also a large, established company and already widely owned.

So, while I like NVDA, I know we can do better.

And that’s why AI is the focus of my latest presentation.

NVIDIA and its CEO see a $1 trillion opportunity in AI, but I’m thinking bigger.

I’m targeting the fastest-growing sector of the artificial intelligence industry, an industry Cathie Wood, CEO of ARK Invest, says will add $80 trillion to markets over the next 10 years.

I call this sector “x.AI,” and it’s set to grow TWICE as fast as every other sector of AI over the next decade.

And my No. 1 stock in this sector has the potential to create life-changing wealth for its early investors.

To find out more, click here to watch my brand-new x.AI presentation.

You won’t regret it.

To good profits,

Michael Carr signature
Adam O'Dell
Chief Investment Strategist, Money & Markets

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1980: President Jimmy Carter signed the Depository Institutions Deregulation and Monetary Control Act. It enabled banks to pay higher interest on checking and savings account balances, which helped secure deposits within the banking system. It also increased the number of banks under Federal Reserve control. Paul Volcker, Fed chair at the time, said the legislation will take "place among the most important pieces of financial legislation enacted in this century."


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