NVDA’s Stock Split, Software Softness, Dollar v. Bitcoin, And Much More
Here’s the transcript from today’s Live Q&A Chat:
Q. Thoughts on where the 10-year Treasury heads in the near term?
A. I would expect the 10-year yield to hang around the 4.5% to 5% range for the next few months at least. If inflation ticks back up like it’s been flirting with, the ten-year yield might creep up towards 5.5%.
Q. On a scale of 1-10, 1 being bearish, and 10 being bullish, where do you sit right now?
A. I’m about a 4 right now, probably. I’m not quite outright bearish, but I remain quite cautious here and prefer to have some cash on the sidelines and a few hedges on the portfolio in the hedge fund right now.
Q. What are the top trims for today?
A. Top 5 trims for today, in alphabetical order, are: Amazon (AMZN), Google (GOOG), iShares Bitcoin Trust (IBIT), Tencent (TCEHY), and TransMedics Group (TMDX).
Q. Interested to hear your take on the report that Musk’s been diverting NVIDIA (NVDA) chips away from Tesla’s (TSLA) AI initiatives and to his other ventures (ie. X, xAI). Does this alter your POV at all on Tesla’s revolutionary potential?
A. Elon says that the reason they did that was because Tesla’s AI space wasn’t ready to take any more chips yet. Tesla will be getting its next shipment of Nvidia chips this summer now that the AI extension at the Texas Gigafactory is getting completed and they have somewhere to put the chips.
Q. Have you hedged your Tesla position? What are the ramifications for the stock if Elon loses the shareholder vote regarding his compensation package? What move do you expect (up or down) pending the vote?
A. In the hedge fund we’ve bought a few puts to hedge about 10% of our Tesla common stock position. The puts are $172.50 and $170 strikes dated out to next Friday. Feet-to-fire, I expect the pay package for Elon gets approved and that the stock bounces 5% or so after the meeting next Wednesday night.
Q. Interested to hear your take on NVIDIA (NVDA) vs Advanced Micro Devices (AMD) for AI investment. Training vs. Inference: 80-90% focus on training models, with a smaller 10% on inference engines. Nvidia dominates the LLM training market, and competitors won’t catch up for 2-3 years. Most internet service providers (ISPs) and supercomputer centers (SCPs) also use Nvidia for inference despite its smaller workload. Is there any market research that forecasts the future size of the LLM inference workload?
A. I don’t think that NVIDIA’s competitors can catch it in 2 or 3 years because NVIDIA will continue innovating too. So far, NVIDIA has received tens of billions of dollars worth of sales of its AI chips while nobody else is really benefitting yet. I think AMD will continue to struggle to catch traction in the AI market. I have been long Nvidia personally for eight years and am still long it in the personal account and in the hedge fund. I own puts on AMD in the hedge fund.
Q. Will you be advising us on when these NVIDIA (NVDA) contracts will be closed or should we be managing on our own?
A. We’re mostly just sticking with our long common stock position in NVIDIA (NVDA). I didn’t short any NVDA calls at all in my personal account, and our NVDA long in the hedge fund is mostly unhedged. I did cover one of the covered calls today and I’ll let you know if/when I cover any more.
Q. Would you recommend waiting for a pullback to get into NVIDIA (NVDA)? Do you anticipate a pullback after the split?
A. My latest thinking on Nvidia is that its AI chips and software have become their own unique platform and that the Large Language Models, robots and other AI technologies that run on top of it are the applications. If Nvidia can keep its lead, and it increasingly appears that it will, it’s got more wild profitability ahead of it. I almost always tell people that if they want to own a stock but don’t yet, perhaps start by nibbling on about 1/5 or 1/3 as many shares as you want to own and then wait a few days or weeks and nibble a little more, hopefully when it’s in a sell-off. I don’t think that the stock split will change much for Nvidia’s valuation and I am not trying to game any moves based on that upcoming split.
Q. I need a winner. Is Toast (TOST) the one?
A. I mean, I hope all our longs are winners! I’m still building my position in TOST and am looking to buy some more near $20 if it gets there. Easy does it.
Q. Last week at the Microsoft (MSFT) Build Conference, they made a significant announcement of Microsoft Copilot +PC. This is a shift from “WinTel” to “WinArm”. So who do you think would win in the short/medium term? Qualcomm (QCOM) has already released the Snapdragon processor and it has been integrated with multiple laptop processors. Do you see QCOM having an edge?
A. Yes, Qualcomm’s been executing well and is probably positioned to take some market share from Intel (INTC)/AMD in the CPU business. Long QCOM/Short AMD seems like a decent pair trade. I own some AMD puts. No position in QCOM right now.
Q. Software has been destroyed or at least is significantly underperforming (thinking, Adobe (ADBE), ServiceNow (NOW), Shopify (SHOP), Snowflake (SNOW)) the same is true of a lot of retail (Lululemon Athletica (LULU), Ulta Beauty (ULTA), Starbucks (SBUX)) and outside of NVIDIA (NVDA) and a few others, quite a few semiconductors stocks and a large % of traditional growth stocks are struggling. I know that you are pretty cautious and if you were really ready to buy anything there you would tell us. Any other comment on this?
A. Now that Autodesk (ADSK) has said they don’t have to restate their financials, we are doing more work on that one again. We reran all of the software stocks through our models and most of them are still, even after this pullback, quite expensive looking out 3 to 5 years. We will let you know if/when we buy any of them back, including ADSK.
Q. I’m with you on the tough road for enterprise software. I sell enterprise software and it’s rough out there right now. Companies are trying to make do with what they have and kicking the can down the road. It’s a risky game as to whether companies become obsolete before they modernize, and whether those who modernize earlier become the winners.
A. You sound a lot like most of the enterprise software CEOs talking about the environment right now. Would love to hop on a call and talk about what you’re seeing in the industry, perhaps late next week one day. Please email us and let us know if that would work.
Q. Outside of reducing the size of the portfolio, did you have concerns with Rocket Lab USA (RKLB) in the near term? For example, if rates stay high, that would punish companies with little earnings?
A. I repeatedly mentioned while we owned Rocket Lab that the company was a very risky investment and should be considered a VC-like bet and that is still the case. I don’t think higher rates are going to kill Rocket Lab or anything like that. I just more than anything wanted to clear my head and take a breather from the stock for a while and then come back and analyze it afresh in a few weeks or so.
Q. Thoughts on Hewlett Packard Enterprise Co. (HPE)?
A. I haven’t done much work on it but it’s a fine company that is finally showing some stability in the business. The stock yields 3% dividends and is trading at 9x next year’s earnings estimates so it’s quite cheap by many metrics. Topline growth has been a struggle for years though, with flat growth this year and maybe 5% growth next year.
Q. Thoughts on Oracle (ORCL) here in the low $120s?
A. Oracle seems to be catching some traction in the cloud and AI isn’t hurting it. That said, it’s not exactly a blazing growth stock here. 5-10% growth this year and next for the topline. The stock is trading at nearly 25x next year’s earnings so it probably needs some acceleration to the topline growth to get the stock moving higher.
Q. Thoughts on Blackrock (BLK)? Will it be a good long-term hold? They will likely benefit in a huge way from their involvement in the crypto world.
A. I don’t know Blackrock well, but I don’t think crypto will move the needle much for that company.
Q. With the dollar continuously losing value due to government spending/inflation, isn’t there a great case for bitcoin (BTC) long term? If BTC were to decline near term, wouldn’t that be a great buying opportunity? What do you think the likelihood is of other countries adopting BTC as their national currency?
A. For the last eleven years, I’ve been explaining how fiat currencies controlled by governments including in the US will always lose value over time and how that is a great thing for bitcoin. So, yes, I do think endless government spending/inflation/money-printing is the primary reason to own bitcoin. I don’t know about near-term decline being a great buying opportunity though because I do think we are getting ever closer to a major washout of the crappy, silly, and fraudulent cryptocurrencies and that bitcoin could get hit or stagnate for a while as that washout plays out. Longer-term, as I’ve been saying for many years again, all fiat currency roads lead to bitcoin. I don’t think more than a handful of smaller developing countries will adopt bitcoin as their national currency for many years but in a couple decades, I would think that 10% of all sovereign nations around the world will use bitcoin as their national currency.
Q. What’s your take on both the residential & commercial real estate market right now? How would you rate residential real estate right now?
A. Real estate can be very local when it comes to pricing moves, but from a national perspective, I’d say that I think the worst of the commercial real estate crash is over and CRE is probably bottoming overall. I think residential real estate is quite confusing here. Prices are too high for most buyers but there’s so little supply, partly because people who have low-interest mortgages don’t want to move at any price and many places still have a lot of homes being used for AirBnB’s. Many tourist locales are probably going to see some serious declines in residential real estate prices as many of the AirBnB’s eventually come back on the market to be sold. But many cities will probably see their residential real estate prices continue to climb in the next few years.
Ok folks, that’s a wrap. Thank you all for being a part of the Trading With Cody family. I leave you all with a couple pictures of the kids and me playing in the pool last weekend. Amaris loves to sit with me and splash. Lyncoln swims like a mermaid.
