Nvidia stock split, plus how to invest in the AI trade

well the AI trade flexing some muscle today as part of its quarterly performance report Nvidia also announcing its latest 10 for one stock split here with me now we've got Jay Woods Freedom Capital markets Chief Global strategist Jay great to see you in the building here great to be here I mean what a time to be alive we're sitting here talking about a company that used to be the darling for crypto Traders out there and a bunch of Gamers now it's got friends in every corner of the world here and they just announced this 10 for one stock split does it become more appealing after an announcement like that well if you own it and I got calls from parents from friends I put in the stock they feel like they won something like hey I I've got 10 more shares we know they beat the split they did this is their fifth split since 2000 first since 2021 four for one stock split and what it means for the retail investors it's cheaper to get in uh if you own it you're going to have 10 times more shares the value is the same but it does feel great when you own a stock that splits what it also could mean it could mean it could get added to the indexes the Dow Jones Industrial Average is price weighted not market cap so maybe we saw Amazon go in after a 20 for one stock split uh I kicked out Walgreens boots Alliance I would be you know uh not a conspiracy theorist I I think it's real to think maybe Intel Your Time Has Come 20 years in the Dow Cisco uh and Nvidia it's more relevant and given that you know the data centers and the expansive growth we continue to see it would be fitting to be in the Dow and now it's more price advantageous to do so yeah you know one of the huge things that we think about is the Bell weather that Nvidia has really been for the sentiment in the markets how long can that be the case it can be the case for a long time I mean you have Dan IES on the show all the time and he talks about early Innings 1995 moment and I happen to agree with him the their growth trajectory let's just put it in perspective this quarter they made $26 billion in Revenue in 2022 it was $27 billion so in one quarter they matched what was a week year a down year but it's the growth continues to rise uh 600% year-over-year net income 500% year-over-year uh EPS you know five years ago was a hundred billion doll company now it's 2.5 trillion and then you look at who their customers are they're the biggest companies in the world the Amazon the alphabet the Microsoft the world so their story continues to grow and it grows you know exponentially so is it early Innings I I say maybe the third but it's it's a stock that you need to be in because it's so Central to the growing Tech story that we're in now Jay I'm going to play this clip for our viewers here who maybe weren't able to tune into morning brief when we were speaking with John Vin uh about his own Outlook and what some of the catalysts are for the stock right now I know you don't have an ifb I'll break it down for you in a hot second here let's play this for the viewers real quick I think there's still very favorable risk reward on Nvidia here you know we think that they can do close to $50 in earnings and you know that sort of earnings power you know Vidia is trading uh very attractively relative to its broader peers right kind of in the High Teens low 20s multiple which is um very attractive from a valuation perspective from our from our point of view all right so John's saying $50 in earnings we could see Nvidia eventually get to what would need to happen what would they need to continue to get right in order to hit that Mark well they're on the trajectory right now they just have to keep doing what they're doing uh there could be headand with Taiwan I know people are worried if there's a conflict between China and Taiwan and Jensen has said I think he said it to Julie in that great interview before that that is the epicenter of their world so if there's a rattle there then then possibly but no the the data center exponential growth is tremendous their partnership with continued partners are great and then the competition they may nip at their heels but they're not really making a dent and the Blackwell Chip he already announced that and then the chip that's going to replace that down the road so their Innovation continues to be one two steps ahead of the competition so the multiples are Justified and that PE ratio you go back to people like to compare this to the Doom bubble maybe it's the beginning of a bubble but they're the leader of the bubble it's these AI companies that come later and IPOs that come later that will signify the bubble they continue to lead I think the valuation is Justified and uh it's going to grow for some time to come and so on the other side of this there has to be outflows from other places in the market if investors are going to Pile in to this crowded trade that already has been Nvidia where is the biggest risk perhaps elsewhere in the market if investors do say you know what this is where I'm reallocating some of my portfolio exposure well what we've seen over the last 18 months is is a big rotation you think about Nidia right now it hadn't broken out to new highs it's been kind of stagnant for the last two months we had utilities lead we had financials lead so I continue to see a rotation the Dow Jones Industrial Average has 25 of its members to 30 members down right now but Nidia is is going strong the SMH the semiconductors are going strong so we're seeing a rotation literally right now where they're diversifying some portfolio going into Nvidia and then Nvidia is number three in the qqqs number three in the S&P 500 so people own it in their indexes and uh the xlk the technology uh ETF it was only 4 and a half% coming into today I believe that will go up so people will own it but what we're seeing this is a secular bull market Nvidia is now leading the race again but goes up and it pauses and then something else comes along I think this is great great rotation in a bull market with Nidia being the leader is it a name that you need to own outright or that you need to perhaps have an ETF or within a basket of other secur well if you own it outright yes it's a name you want to be in but you don't have to put all of your eggs in that one basket the the SMH the vanx semiconductor fund is a diversified basket of chipmakers if you think Nidia is going to lose some of that uh you know MOSI to its competition then you you buy the semiconductor index the NASDAQ 100 uh has the Magnificent 7 that's another great place to be in and then you have smaller ETFs not as liquid a Bots botz and a metaverse and MeTV that have Nvidia as one of its components and have different aspects of AI plays within them so there are other ways to diversify and own Nvidia but if you own the stock hold on to it if it grows to be too much of your portfolio as it continues to climb then you sell it off and you buy something a little cheaper a little safer but uh for those in it congratul rations you feel like you won with a 10 for one stock split Jay I thought you were going to be joining me in leather jackets Al Jensen Hong but you hit him with the sear sucker today ahead of the Memorial Day Weekend Jay great to see you man have a great weekend absolutely Jay Woods Freedom Capital markets Chief Global strategist joining us here on set

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Length: 6min 46sec (406 seconds)

Published: Thu May 23 2024