NVDA Earnings, INTC Discussion, RKLB Buys VRBO Assets, BKSY, And Much More

Here’s the transcript from today’s live Q&A chat. Also, don’t forget to follow us on Twitter @TradingWithCody!

Q. Which stocks do you currently like the most? And the least? In your portfolio.

A. Favorite right now are: RKLB, ROK, SMR, INTC, UPWK. Least favorite right now are: NVDA, AAPL, META, AMZN.

Q. $NVDA Jensen Hwang had been telling the same story for some time now. And this ChatGPT thing plus this quarter’s earnings just reaffirmed his AI-cloud-based AV story. Yesterday, Cody in his email stated that this AI thing would only take 3-5 years to realize its increased productivity potential instead of other revolutions which could take decades to take roots. If the whole corp world is moving to this cloud-based GPU powered AI model, what would this coming years look like.

A. The single biggest risk to NVDA here is that the average selling price of its best GPUs at $40,000 a pop right now is going to drive customers like Google, Apple and Tesla to design their own chips that are more specialized than Nvidia’s GPUs which are probably a bit overkill for some AI applications. The thing about capitalism is that high prices drive competitors and substitutions to get better.

Q. What’s your take on NVDA earnings and what does it mean for AI?

A. It was a huge guide up and NVDA’s basically the purest play on AI for now. That said, I don’t think its current pricing power will sustain and while AI will be a huge impact on the economy, it will take another 2-5 years for much of the impact to happen.

Q. Almost every analyst massively raised their price targets on $NVDA after their recent earnings. With price targets as high as $500, is there realistically another 25% upside in the year ahead?

A. Anything is possible when it comes to momentum and crazy valuations. A crazy valuation multiplied by 1.25 is still just crazy. To justify its trading at 20x potential 12 month forward revenues the company will need to grow 60% or more for the next couple years and average 40% topline growth for the next five years. If it does that, it could get to $1800 or so in five years. I think that’s unlikely though.

Q. INTC to me seems like part of the old techs of IBM etc. I’m still holding a sizable position bc of Cody’s rec. I don’t know how any of Intel chips are going to compete with those from NVDA’s. Will building a plant in US make any difference?

A. Intel’s biggest upside could be from its fab business when it starts making chips for other companies in a few years. In the meantime, the CPU business has been hard on them as PCs have been in hard decline.

Q. INTC so far has proved to be a real drag on my portfolio. Chips up big. INTC down. Ridiculous to say the least….

A. I agree. I wish I never picked any stocks that underperform. But it does happen. Let’s look back in five years and see where we are with this.

Q. Cody, as you can see most of the users are worried about INTC. We are somehow missing the right entry points for our long positions. RKLB same thing. We are more positions in red than green in this “blow off” market you said today.

A. I don’t think that’s true but I am certainly disappointed in myself for having any losers in the portfolio even if that’s unrealistic. I do think RKLB and INTC will pay off for us in years ahead and that I might be able to talk about those and even SMR in the same way I do about NVDA and SEDG since it’s been 5-7 years since I bought those. They didn’t go straight up either of course.

Q. RKLB has had a fantastic month, with the acquisition of some of Virgin Orbit’s facilities and tooling, two successful launches of NASA’s Tropis satellite constellation, great news on Neutron, etc. And like clockwork, the stock is down. Even on rally days. Very frustrating for such a great company. Can you explain this?

A. The stock is up pretty sharply off its recent lows over the last month, but it’s still underperforming. The Space Revolution gets no respect and also, RKLB is, like most space companies, not profitable yet and so there’s an existential risk to this company that most semiconductor stocks, for example, don’t have.

Q. When do you think BlackSky will become profitable? What does it take? Thank you!

A. BKSY will probably reach profitability in the next 3-4 years. The company had revenue of $70mm over the last twelve months and has gross margins of about 46%. Operating expenses over the same time were $120mm. BKSY is expected to grow about 44% for the next two years. Assuming it continues to grow at 50% per year for the next 3-5 years, operating expenses grow at about 15% per year, and gross margins improve to the 65% range, the company will be profitable in probably four years.

Q. Been a long time since you discussed Disney – know you used to think very highly of it but would love an updated thought here. Been crab walking for a few years now and can’t decide if I should cut bait or stick it out and keep it as a LT position.

A. I love Disney’s business model over all and they’ve done a great job of buying up Pixar and Star Wars and Marvell but they are not nearly as profitable as I think they should be. I do like the company but it needs to find higher margins.

Q. Can you please give us a list of potential short candidates with this AI hype? Which are the pretenders? There would probably be some short squeezes coming.

A. Yes, we are working on it. It’s dangerous to short and most people shouldn’t mess with it but I do expect there are some great short opportunities in AI and probably in the semis right now too. I did buy some puts on AVGO and the SOXX today and I might add some puts on C3.ai (symbol is AI) but easy does it.

Q. Thoughts on LLAP here with its announcement of direct offering?

A. I’m still avoiding LLAP but I like some other space stocks here like RDW, BKSY, PL and especially RKLB.

Q. What do you think of $CDNS as an AI play?

A. We are doing some work on this one. I think AI is probably awfully crowded right now and there will probably be a better time to buy most good AI names than this week or next.

Q. What do you think about On Semiconductor (ON)?

A. Great company, a little too expensive as a stock for me right now.

Q. Do you think the cannabis companies are bottoming here as more states approve its use?

A. I think cannabis is a growing industry but the margins and opportunity to make money investing in the industry is hard. Too commoditized overall.

Q. Are you adding to your shorts in LAD or VSAT? Thanks.

A. I’m not looking to add to the shorts per se, but I will likely add a few puts on each one, LAD and VSAT in coming days. Only in the hedge fund.

Q. Your old pick, PI is doing well. What’s up with that?

A. Haven’t looked at it in years but will check it out.

Q. Some more time on the chat board would be appreciated.

A. I’ve asked Bryce to start monitoring the Trading With Cody chat room on week days from now on. He’ll answer some of your questions and will flag others for me to come in here and answer daily too.

Q. Thank you. HAGWE and hi to Amaris and rest of your beautiful family.

A. Thank you for the kind words! Amaris and Lyncoln are being adorable and my wife is always a rock who takes of us/me.

That’s a wrap. Thank you all!