NVDA: Monkeys and humans

Over the past several months I have increased my position in NVDA…from about 5% to more than 10% of my portfolio. Why?

Because I think the upside is unpredictable but it could be very huge. Why?

It has to do with intelligence. Intelligence what has enabled humans to progress while the next smartest animal has not advanced at all. Intelligence enables humans to create tremendous value. We can see that technology is advancing exponentially. Since the invention of electricity and then the transistor, things really took off. These 2 inventions were prerequisites to AI. AI will change everything because it is intelligence outside of the human brain. AI also does not have the limits of the human brain. In some areas, AI’s intelligence has already advanced beyond what the human brain can do. As it continues to advance, AI will become better and better at more and more tasks. Humans are to monkeys what AI will be to humans. NVDA has recently made this possible and NVDA’s technology that enables AI is becoming more and more advanced. Therefore, NVDA is the tool provider (picks and shovels vendor) for the AI gold rush. It is a gold rush but unlike the gold rush in the 1840s and 1850s; this AI gold rush will be global and it will transverse all markets and all industries. Those firms that don’t utilize AI will be dominated by those that do. I wouldn’t want a monkey running my company so any business that doesn’t utilize AI will be outsmarted and outcompeted by a competitor that uses AI.

I have been reading NVDA’s blog (https://blogs.nvidia.com) for about a month now, and I am amazed how much AI is already doing.

I know that NVDA trades at a TTM P/E of around 50 and that their market cap is already over $100B. I cannot quantify how much business NVDA might get in the coming years, but I’m pretty confident that it’s going to go up A LOT. Will NVDA become the world’s most valuable company? I don’t know but I wouldn’t be that surprised if it does. NVDA will report their FY18 Q2 results this afternoon. On a big down day for tech today, it will be interesting to see what NVDA’s shares do in the after hours trading session.

Chris

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Speaking of NVDA, anyone considering options? There’s an expiration after tomorrow, so there is a super-short term possibility for a bet on earnings reaction.

Speaking of NVDA, anyone considering options? There’s an expiration after tomorrow, so there is a super-short term possibility for a bet on earnings reaction.

Last week I sold the $170 put and bought the $170 call for a net credit of $2.78. Expiration is on Friday. I was a very small trade compared to my position size.

I’ve made a number of pre-earnings options bets on SHOP, SQ, LGIH, and NVDA this and last earnings season. Most have worked out very well recently.

Chris