Nvidia (NASDAQ: NVDA) shares have been quite the generational builder of wealth over the past five years. Indeed, the artificial intelligence (AI) revolution is the real deal, and the monetization gains could be right up ahead as some of the biggest heavyweight champs within the tech sector continue to allocate big money on hardware (everything from graphics processing units to dynamic random access memory and everything in between) to advance the technology. Indeed, the rise of “AI slop” might have some folks doubting the staying power of this AI revolution.
But as firms backtrack on some consumer-facing AI while doubling down on ambient AI (or invisible AI) behind the scenes, which can actually save massive time and money, I think that we could see investors start viewing the technology as a massive shot in the arm for an enterprise that drives software production down towards zero, rather than something that just replaces everybody.
It’s hard to pick which firms will win and which will be spending $100 to get $10. While some of the consumer-facing AI is impressive, it’ll be tough to convince the masses to pay an amount that justifies the kind of spending that’s going on. Either way, it’s going to be interesting.
A person stands in front of several doors representing different U.S. stock options for Canadian investors.
Nvidia stock still looks cheap, but is it cheap for a reason?
For Nvidia, the stock looks incredibly cheap at 29.4 times trailing price to earnings (P/E). But it’s only cheap if the buyers, most notably the mega-cap tech titans, keep buying. If the Magnificent Seven titans start showing restraint on capital expenditures, I suppose that a name like Nvidia could be put in a really tough spot. Whether the biggest spenders, especially those in considerable debt, are playing a game of chicken remains the big question.
All it’ll probably take is one firm to trim the spend for investors to hit the panic button as they rotate out of the semi trade that’s grown way too hot of late, likely pricing in many years’ worth of growth right off the bat. In any case, it should be no mystery as to why so many smart-money investors are trimming their profits in Nvidia.
The stock hasn’t exactly been the biggest gainer this year, up just over 1%, far less than the S&P 500. Indeed, who knows how long the digestion phase lasts? But until there’s confirmation that the cyclical bust isn’t sitting right around the corner, I think it’s wise to consider diversifying into some safer names out there.
Brookfield Corp.
One of the Canadian stocks that’s a cheaper way to bet on the AI boom might lie in Brookfield Corp. (TSX: BN). The alternative asset manager may very well be in the sweet spot as the AI bottlenecks become more apparent.
With skin in the game of power, real estate, and more, Brookfield Corp. certainly stands out as a great way to win from the AI boom without having to risk one’s shirt. While Nvidia might still be a great longer-term bet that demands patience, I do think that recent smart money buying in a name like Brookfield could signify where the better risk/reward lies.
