omg nvidia stock [nvda]

well let's talk about Nvidia reports

earnings today but we've got to go

through some of the big competitive

advantages for NVIDIA even Beyond

earnings we'll talk a little bit about

earnings expectations and some of the

things to look for in the finances but

most importantly we want to talk about

what makes Nvidia an interesting

potentially unique investment

opportunity in the long term what are

some of its advantages so outside of the

short-term news what's the long-term

thesis for investing in video and what

do those finances look like well let's

start just there so when we actually

look at the finances we can see that

Nvidia and much like most of the chip

companies are quite frankly in a bit of

an earnings well recession this is the

latest uh Nvidia report for the Year

this is their latest annual report for

the year ended January 2023 so in other

words uh the full year of basically 2022

Jan de Jane you can see that Revenue was

flat while Revenue was flat their cost

of sales so their costs of goods sold

their products cost them 23 percent more

so their income was flat

but 23 more cost for the actual products

their research and development up 39

sales and general and administrative SG

a of 12.6 leading to a net income

decline of 44.7 that is a negative a

negative

44.7 decline in uh net income this is an

example of your earnings recession now

it could be argued that hey look the

company exploded and the fact that you

have flat revenue is actually fantastic

because think about it you went from 16

uh 0.6 billies in January of 2020 uh uh

one to

26.9 billies of revies

right after that uh which is freaking

awesome because if you look at that it's

like hey wait a minute Kevin that is a

62 increase and the fact that we're flat

off of that not bad it's literally like

growing like this then having this

exponential explosion uh and then being

flat yeah I wish it didn't correct

because I liked my drawing better it's

kind of like growing like that and then

having this explosion of exponential and

then flattening at least it didn't

plummet back down to where it was just

sort of a little triangle there right so

this is actually pretty powerful even

though costs are going up the revenues

are flat and then that income is like

down 44 you've left the stimulus era

right so of course you've got these

really negative calms and these negative

comps have led a lot of these

manufacturing company or a certain

manufacturing companies these chip

designing companies like Nvidia AMD

right they all pretty much use tsmc to

manufacture maybe Intel will come in the

race in the future though they've got

some work to do they actually think that

Intel could be a big player in the one

and a half to two nanometer chip space

we're not quite there yet right now

we're working in the three to five

nanometer uh chipset space that's the

spacing of uh transistors and chips the

the smaller in theory the more efficient

and the better these chips could be the

stronger and more powerful that's all

down the road well Intel could be a game

changer in manufacturing probably in

2024 25 26. uh although they could also

be a value trap and end up going

bankrupt but that's really a topic for a

different video we talk about Intel a

lot in the course member streams uh

mostly because that thing's trading for

a PEG ratio of like 0.5 now before I

lose you on PEG ratio remember what a

PEG ratio is it's how much you're paying

for growth at a company and one of the

things that I like is I like looking at

companies uh usually around a one and a

half to 1.69 1.7 PEG ratio that's about

where Tesla is trading now it's about

where end phase is trading now

Etsy is trading below that right now a

problem with something like Nvidia is

it's trading for a little bit above that

range right now at 306 dollars per share

306 dollars this is your share price and

you'll see how to calculate Peg as well

uh right now we're looking at an a full

year of 2023 so first quarter earnings

aside full year of 2023 which is their

fiscal 24. we are looking at earnings of

about four dollars and 60 cents

projected we'll get some guidance on

that but it'll probably be somewhere

close to that 306 divided by 4.60

puts you at a p e ratio a forward p

ratio so we say FPE a forward p e ratio

of

66.5 that's a little bit rich now the

company in terms of growth is expected

for 25 6 7 and 28 all together to

average about 25 growth well if we

divide by uh 25 growth so in other words

that p e by 25 uh removing the percent

is what you do for this math divide 66.5

by 25 you get a PEG ratio of about 2.66

unfortunately just on a simplified

valuation measure that's quite a bit

above where we probably ought to be of

closer to 1.6 1.7 it's about 66 above

that that's quite a bit stretched right

now now maybe nvidia's earnings will

explode more and that's possible that's

the hope is that nvidia's earnings will

explode more because of well the whole

reason people are investing in video

right now and it's obviously

artificial intelligence everyone's

investing in Nvidia right now because

it's seen as the best play for

artificial intelligence going forward

and that might be the case because quite

frankly when it comes to Dedicated gpus

graphic processing units uh which are

going to be the strongest and most

powerful for providing data and services

for well artificial intelligence

Nvidia takes about 80 to 88 of the

market share that's really really

powerful so when you have Nvidia taking

80 to 80 percent of that market share

you kind of look and go well if you're

going to want to invest in AI maybe just

maybe investing in Nvidia is the place

to do it the problem is AI has really

been hype trained up before we've

actually started to confirm where AI

revenues are going to come from this is

something that I always caution and it

is this idea of okay well look AI we

know is going to be great I think all of

us agree that it's going to add

productivity to us as individuals if

you're not becoming more productive

because of uh artificial intelligence

you're probably going to end up getting

left behind you don't want to get left

behind because if you get left behind

you're more likely to lose your job

you're less likely to get a promotion

you're less likely to as actually get

ahead in life so you want to incorporate

AI in your life and we want to invest in

AI related plays this is why I have a

program on building your wealth so we've

got programs on investing stocks and

real estate we do fundamental analysis

on stocks you know we'll do some

fundamental analysis on Nvidia here as

well and we'll do some earnings

expectations but also well we have a

course on building your income how to

make more money and get sh19 done faster

featuring AI the AI segment and how to

actually incorporate AI in your life

comes out June 1st so check that out

before the pricing goes up after that

content drops but what do we know about

Nvidia well we know a lot we know that

Nvidia is uh using tsmc to manufacture a

lot of their chips and they sell their

gpus to the software companies and

server companies that use them for

artificial intelligence think Microsoft

AWS Google Cloud all of them when they

use AI most of the AI technology and

processing in the compute power hours

being put through Nvidia gpus now Google

does have these tpus which we don't want

to go into this super detail of what all

these different processing units are in

that case that's a tensor processing

unit and Amazon's also making its own

server-based uh chipsets but when it

comes to actually processing artificial

intelligence Nvidia has like I said 80

80 of the lead now there are two

different types of Graphics units

they're sort of your integrated Graphics

chips in which case Nvidia actually has

a very small market share of them this

is sort of for your regular consumer

products whether it's a laptop or

whatever but when it comes to Dedicated

graphic processing which used to be uh

ethereum mining for example with gpus

which no longer is that's LED their

Gaming revenue to absolutely tank that's

contributed to their earnings recession

uh that's gone now right but when we

have dedicated uses for artificial

intelligence what are we looking for

with looking for dedicated use chips in

Nvidia is the 80 to 88 market share of

this and again they're using tsmc to

manufacture but tsmc has also got a

little bit of an up their evaluation

probably also trading for somewhere

right around a three peg but people see

Nvidia as the really shovels of the gold

mining race in artificial intelligence

and the reason people call it sort of a

picks and shovels play is again we don't

know which software companies are going

to win when it comes to Aeon we think

that oh Google's going to win or open AI

is going to win or all of these you know

maybe Microsoft will win because of

their investments into uh uh you know

open AI or you know Google's Bard will

win but the problem with this is we

don't know yet which software is going

to win in my opinion the best software

is where people are going to flock to as

soon as there's a better chat bot

everybody goes over to that chat bot and

dumps The Bard and open AI behind that's

a big problem especially since when you

look at a company like Google in terms

of an investment you're looking at

advertising revenue and network placing

placements on websites representing 69

of the company's income

well if that income starts bleeding down

because you need to search less sure AI

will contribute to some sort of income

uh at Google how do we know how much

income that's going to contribute what I

worry about is that AI will contribute

Revenue like this for Google well their

ad Revenue goes down so you'll see an

increase of AI Revenue here for Google

but you'll see search and advertising

Revenue Decline and you potentially have

this massive loss as potentially some of

these ads go to other AI platforms we

just don't have that certainty yet but

we do know that Nvidia is probably your

AI processing play and that's exciting

this is one of the reasons nvidia's

blown up so much recently one of the

things to know as well is that a lot of

people use the Nvidia architecture for

actually building applications or

programming on and I'm not a programmer

but a lot of people use the software

stack that Nvidia uses to extract the

power out of gpus the coda system is

amazing for doing exactly this and a lot

of people prefer it and when they prefer

this for their server infrastructure

they have to use Nvidia chips AMD is not

even close yet in in terms of these

these AI processing chips that Nvidia

has and they're just now I mean way

after Nvidia have they gotten into

creating their own software Stacks to

try to compete with it what Nvidia has

so Nvidia has some massive advantages

now what's also exciting a lot of the

Cuda by the way creates a massive mode

for NVIDIA so when you're investing in

video you're not just creating it or not

just investing in this chip designer

you're also investing in their software

and the moat that they have because of

their software whether it's the

Omniverse or Cuda or otherwise now it's

worth noting that if you look at the top

about 111 actual Graphics units listed

on Benchmark UL what's remarkable is the

first 111 chips basically show you a

dual opoly you have AMD and Nvidia

that's it when it comes to graphic units

but when it comes to AI once for those

servers

Nvidia is the winner it's not until the

112th chip that you actually get to an

Intel graphic Processing Unit which is

pretty remarkable now one of the

downsides that you're seeing right now

is unfortunately Nvidia has this huge

backlog of inventory of gpus because of

the lack of use from ethereum Mining and

also everybody's already bought their

new gaming PC during covid so you have

this massive PC Crush you've got a

massive inventory glut so you actually

have some risk factors for NVIDIA in the

short term that potentially inventory

gluts are going to reduce pricing power

at companies like Nvidia you're going to

see reduced margins and you're going to

see reduced revenues before you actually

see the AI revenues come through just

because AI started becoming really

exciting in the last two months doesn't

mean all of a sudden every company Under

the Sun is buying more Nvidia chips it

could take years to really see AI play

out at Nvidia so I think Nvidia is

really this play that you have to look

at from a long-term point of view rather

than something that you want to play

short term I actually actually would be

short-term bearish on Nvidia trying to

play earnings mostly because we don't

know I mean maybe that's already built

into the expectations that's always the

funny thing with earnings uh you know

when you look at earnings you're looking

at an implied one-day volatility

movement of 4.7 percent so 4.7 stock

movement after this earnings doesn't

seem that big uh nvidia's EPS has beat

four out of eight times so it's a total

coin toss although their revenue has

beat seven out of eight of the last

times so there's a good chance they'll

beat on the top line again but

potentially again miss on the bottom

line so we'll see but we know nvidia's

had one heck of a run-up recently

because of AI and I don't think AI is

going to be contributing to a big

portion of their revenue anytime soon

even though we do know and maybe they're

forecasting their guide will help

because if they give a really Rosy full

year guide maybe that'll help boost the

stock but I really think it's going to

be a minute before we see some of this

this Revenue actually pushed through

Nvidia doesn't really do a 5G we know

this is more of a Qualcomm play but some

people have been asking about that

you've got competition coming for a

manufacturing but that could actually

contribute uh to uh to Nvidia the more

companies like Intel or Applied

Materials or whatever uh Micron uh in

America that might end up manufacturing

under the chips act those companies uh

will benefit from from the stimulus

checks the governments are handing out

for manufacturing chips in the United

States this is good and that could be

good for potentially reducing some of

the costs of Nvidia actually having to

manufacture chips because remember

Nvidia doesn't manufacture they design

and create software and then they

Outsource the manufacturing this is very

typical only Intel really does both they

both design and manufacture but even

like a Tesla they might design their own

chips but have somebody else manufacture

them so uh there is some excitement

about this manufacturing Coming to

America this sort of reassuring some

worry that this is going to be

inflationary and actually increase the

cost of of chips and even the CEO of

Nvidia just today on the financial times

argued that we have to be careful about

more of these restrictions against China

and sort of limiting China's exports uh

mostly because they could end up hurting

nvidia's ability to actually sell this

massive backlog of chips that they have

so there are some short-term concerns as

well with the United States potentially

being too aggressive against uh China

and how more of these chip bans could

potentially actually encourage China to

uh to manufacture their own proprietary

chips at the downside or to the downside

of Nvidia but just today in the

financial times you have the CEO of

Nvidia warning about enormous damage

from the escalating battle over chips

between Washington and Beijing

suggesting that your tying silicon

Valley's hands behind their back if

China can't buy from the United States

and they just end up building their own

chips so a big warning there from Jensen

your CEO of course China's uh China

before all of these uh sanctions or as

many of these sanctions China

represented somewhere around 24 of

nvidia's order book so big chunk of it I

actually like investing in companies

that have exposure to China generally

because I don't have to invest in

Chinese companies to get Chinese growth

I can invest in American companies to

get that growth I like that uh you did

just also have an announcement between

Apple and broadcom but that's more of a

middle finger to Qualcomm than it is to

Nvidia Intel dominates the CPU market

and maybe the integrated GPU Market

contributes to this but really Nvidia

when it comes to Dedicated trips and AI

chips they're the almost the only game

in town on top of that they're paying

somewhere around 1.9 percent in taxes

because they run a lot of their revenue

through subsidiaries whether it's in the

Cayman Islands the Netherlands or other

countries in Europe

this has led a lot of people to be very

frustrated over some of the tax credits

and and opportunities that they're able

to do to avoid or take advantage of to

avoid taxes and a lot of people Slam in

a video for this Nvidia sees this as

just smart taxation running some of

their revenue even through Israel or

Hong Kong and they suggest this allows

them to spend more money on R D which

Nvidia will also benefit from chips uh

the chips act and r d spending which is

great remember this is this is stimulus

money it's basically free stimulus money

uh which is very exciting these these

companies will benefit tremendously from

Investments directly from the government

and money printing so if you like

investing where stimulus money is going

chips manufacturing and chips you have

to be careful though because if you

search like top chip companies in

America you might get search results

like Frito-Lay or lays or whatever it's

a problem so you have to be careful but

uh anyway I I do I I just want to make

sure we're doubling down on how

important Cuda is because a lot of

current AI systems are actually trained

on this coding infrastructure of Cuda it

is a massive mode for NVIDIA it has been

in development for 16 years it's their

proprietary uh software stack and it

lets you extract That Power from the

Nvidia GPU so if you just if you want to

run processing through the gpus rather

than just the CPUs you have to use Cuda

uh and and Cuda is just it's robust it's

great it's a fantastic software so the

competition just doesn't hold a candle

to this and so people like manufacturer

or basically coding with this compared

to uh amd's uh Rock M which is you know

sort of your closest second but it's

still a big second uh it's probably some

people say it's nine years behind Cuda

it probably isn't nine full years behind

it's probably more like two or three

years behind but uh it came nine years

later so uh it's also worth noting that

Nvidia has transitioned from gaming to

Data Centers and this has been

critically important because gaming has

just absolutely gotten destroyed uh or

post covet because again everybody's

already got their uh uh they've already

got their new gaming PC uh and gaming

has been substantially less of of a

level of importance for nvidia's Revenue

uh amd's catching up on gaming as well

so maybe less of an area to to really

grow but really what's what's important

to know is that right now the market is

already pricing in about 25 percent

growth for NVIDIA uh and that's at a PEG

ratio of 2.6 I think we said uh yeah

2.66 you're already paying a premium for

that 25 growth I think 306 is a high

level I'm not saying that Nvidia

deserves to go down I wouldn't short

this stock just because it's such a

blindly easy pick for institutions to go

oh we need AI exposure just buy Nvidia

like a drunken sailor because yeah

artificial intelligence that doesn't

mean it's going to outperform other

stocks though in the near terms so while

I have exposure to Nvidia I'm not I'm

not very excited about having a super

high allocation to Nvidia uh right now

would I consider trimming before

earnings potentially am I going to I I

have no idea uh I I don't generally like

playing or earnings I think it's very

risky to do that but I do think there's

a lot of enthusiasm that's coming before

the the actual stake right like the

analogy of selling the sizzle before the

steak yay AI boom okay where are the AI

revenues uh they'll be here in a few

years like they will come but it's going

to take a little minute and and at this

PEG ratio I think there are better deals

to buy uh I mean you know we just had a

report uh from Goldman Sachs that online

retail is starting to explode again in

April based on retail sales reports from

April and you're looking at uh Etsy

trading at about a 1.3 times Peg so it

makes you wonder okay do you want to get

into that kind of consumer discretionary

do you if you want AI Tesla's much

cheaper than in video right now at you

know somewhere around a 1.6 to 1.8 Peg

you have to be careful when you do these

these uh calculations as well not to use

2022 numbers you have to go current

current year out so 9 to 16 18 months

out is generally what I do with

evaluations because you're getting away

from some of the whole of the earnings

recession that you saw in 2022. so uh do

keep in mind for expectations we're

looking at 92 cents of adjusted EPS Gap

EPS we're looking at 61 cents Revenue

expectation we're looking at

6.52 billion dollars net income 2.27

Bill expected uh data center revenue is

expected to jump nicely so hopefully

that uh that stays that way uh again if

if you run some DCFS on these you're

you're really looking at growth already

priced in at least 25 already priced in

some are arguing depending on how you

run your DCF that you could be sitting

around 30 already priced in 35 price

damn uh so a lot of uh a lot of uh

richness already priced there we'll

leave it at that but again you know

they're going to have a great growth

story over the next decade and it's

possible that the growth that's been

forecast before this AI boom hasn't yet

really been updated to reflect how much

growth is truly going to come from AI

though I will say I think AI is going to

be a big part of what we hear about in

the earnings call today so that'll be

fascinating and so I'm super excited to

see what happens here at the same time

again AMD is is really focused on gaming

and yes they're going to focus on to

some extent uh servers and and AI for

Enterprise the the right focus in my

opinion is on

Ai and and these server chips and I

think Nvidia is just playing the game

correctly here they've got the edge with

good they've got the moat with Cuda uh

and uh and they just they're dominant in

the market so there's little you could

say about how Nvidia is not going to be

a massive beneficiary of AI they almost

certainly will be a massive beneficiary

of AI but uh the valuation today hey

let's just say you know I I hope uh I

hope they crash uh over the next few

earning Cycles so you could pick up

Nvidia cheaper maybe when the AI hype

cycle dies down a little bit uh am I

jumping up and down about buying in a

306 hey who knows you know maybe they

give Rosie guidance and they're up 10

and you're like ah should have bought

you know but the valuation is Rich and

usually the market does a good job of

eventually leveling out those Rich

valuations so uh if I had to say what

would be a little bit more of a fair

price right now uh for NVIDIA I'd

probably say you'd want to be closer to

and people are gonna get mad at me

saying it but probably 200 to 250 would

be more reasonable if you were under 200

like we were for a while when I

initiated my position in it around 150.

well then it was just juicy but duh I

mean it's doubled since then so uh

anyway uh remember if you want all of my

buy and sell alerts join the stocks and

psychology of money group link down

below if you want to join me on the AI

drop make sure you join before June 1st

for the how to make more money and get

sh9t done faster course members who are

already part of uh the income course or

getting that sector for free and you can

lock in your price as well before we

increase the price again when the

content actually comes out on June 1st

the other content's already in there but

the AI content is coming out on June 1st

uh so with that said very excited about

Nvidia long term short-term bearish uh

it doesn't mean I'm gonna dump all of my

uh Nvidia exposure beforehand though but

uh who knows maybe a little trim is in

store but yeah anyway that gives you

some insight on a video hopefully it's

useful for you even Beyond this next uh

earnings uh set that comes out and uh

yeah I wouldn't bet against them long

term for sure just like you should bet

against those courses on building your

wealth thing down below

see you later

[Music]

now I want you to know this when it

comes to AI time is what's going to make

you money and if you can prove that

value to an employer you'll always be

able to be employed so this is another

way of making sure that you don't get

replaced a quick follow-up on Nvidia

some people want me to look at the

balance sheet and the cash flow

statement fine fine I'll do that okay

here's the quick skinny on it they've

got about 13.2 billion dollars of cash

and marketable securities they've got a

short-term liabilities in in the Kevin

math I do Kevin math a certain way of

about five billies and maybe about 11.6

in long-term debt free cash flow you're

sitting at about 3.8 billion so you've

got free cash flow so the the debts

don't terribly much matter here they've

got plenty of operating room uh actually

pretty pretty good financials