- We’ve long thought an AI bubble was possible: I’d say we’re there, though it may still be early.
- We recognized Nvidia’s potential and bought it early in the year.
- While we can’t make the case that it’s undervalued, we also don’t believe it’s significantly overvalued, which is typically where euphoria ends.
The following segment was excerpted from this fund letter.
In the current bifurcated investment environment, winners win, and losers lose. Big time. Trends get taken to extremes. We’ve long thought an AI bubble was possible. I’d say we’re there, though it may still be early.
Fortunately, we recognized Nvidia’s (NASDAQ:NVDA) potential and bought it early in the year. It was capturing the bulk of AI profits with a significant market lead and deep competitive advantages. We believed it was more like Microsoft (MSFT) than Cisco (CSCO), which implied significant potential upside to its intrinsic value. It’s since more than doubled and reached our bull case level. To justify current market expectations, we believe Nvidia needs to accomplish something unprecedented, like sustaining its current 65% operating margins for decades.
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