13 Mar. '24 : AI boom continues; Strong performance from ORCL and NVDA
This is not investment advice!
This post is a periodic update and contains my personal opinion about positions in my portfolio and my watchlist. You can see my portfolio here, and this should serve a disclaimer about my vested interests in these assets.
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ORCL 0.00%↑ released their earnings report on Monday, 11th March and the stock has reached an ATH. The Cloud Infrastructure (OCI) business saw a 49% jump in revenue from the previous quarter. This was the original thesis for investment. They were unable to get enough NVDA 0.00%↑ GPUs in time last quarter, so expansion was GOOG 0.00%↑ , MSFT 0.00%↑ and AMZN 0.00%↑ command high profit margins in the cloud infrastructure business, and market is rife for competition. Oracle has the deep pockets and ambition to take some of that market share.
NVDA 0.00%↑ was also up more than 7% yesterday. I've secured a lot of profit from this investment and hold only a small position in this stock by now. I won't start calling it a bubble now that I have exited the position. :-) I do expect a correction though and I will buy the dip when that happens.
NVDA 0.00%↑ continues to be a monopoly in the business. So far AMD 0.00%↑ hasn't managed to produce a competitive product, but the market expectations are high. The PE ratio for AMD 0.00%↑ is astronomically high at 390, compared to 75 of NVDA 0.00%↑ . Meanwhile, QCOM 0.00%↑'s PE ratio is at 25. I've also secured profits from AMD in the past few weeks and I will continue to do so in the coming days.
I do not expect the demand for AI cloud infrastructure to slow down yet. There have been advancements in text to image and video generators and I believe this will continue to be a strong area for innovation and it will also attract more serious customers, ready to pay much higher subscription fees.
US inflation rate turned out to be higher than expected. WMT 0.00%↑ earnings report also showed consumer spending continues to stay high. Unemployment numbers haven't budged either. This indicates another quarter of strong demand and that revenues for companies may be higher than projections for Q1 2024. This also suggests that interest rates will continue to stay high. The current expectation is that we will see first interest rate drop in June 2024, but I expect this can get pushed further.
As I had mentioned in my post below, contrary to common belief, I expect the market to drop after the interest rates start to drop as demand for real estate and government bonds will pick up.
Thank you for reading!