AI and Nvidia: What investors need to know!
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Now you know things are starting to get, at least I know things are starting to get a little crazy when it comes to, I guess, a technology, a hype cycle, when mom calls up and asks whether or not she should own Nvidia.
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Yeah, yeah, I had that conversation with mom, Christopher, Christopher, do you think, what’s this Nvidia thing I heard you talking about on Morning Zoot Maria, should I own that? Mom, you already do, don’t worry about it. What does it do? Makes chips involved with artificial intelligence. Yeah, she doesn’t understand what it is, she just knows that, hey, the stock is racing through the roof and that’s, again.
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Many companies are when it comes to artificial intelligence and that’s what builds into a hype cycle. I wanna explain to everyone, cause we’ve been through three decades, we’ve been through quite a few hype cycles and how we go about handling them, how we go about investing in them and how we’ve managed to not lose money in hype cycles.
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because the reality is that’s what happens to most people. And I’m gonna go back to one of the greatest type cycles of all time. We’re gonna go to the dot com run up and what took place in the second half of the 1990s. And again, go back to the early days, the infancy stage of the internet. And I mean, I remember the commercial.
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for, remember Windows 95. They had a little start button down there. That was a big thing. And they had the Rolling Stone song, Start Me Up with that. And it was a great ad. And again, things started to snowball, if you will, America Online and all of these new technologies that were coming down the pike and the internet that Al Gore invented that became oh so popular.
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And you got mail there from AOL. And all of the things that were taking place and everybody wanted to be a part of it. And rightfully so, rightfully so. Unfortunately, most people, quite frankly, they didn’t understand it. And I’m here to tell you the same thing holds true with artificial intelligence. Most people, quite frankly, they don’t understand it. And I’m here to tell you, I fully don’t have my arms.
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around it and I probably won’t fully have my arms around it for some time. For some time. But that’s not going to prevent me from investing in that arena. What you need to do, you want to be successful in a type of hype cycle. Okay, you have to, you have to stay again, stay away from the TV and the latest and greatest this and latest and greatest that out there.
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And you got to focus on first and foremost, we’re having this hype cycle. What builds it? Okay. What’s involved? What components are involved? Um, for example, you go back, go back to the 1990s. Uh, we were investing in what we call them toll keeper, uh, companies, companies that actually built the internet companies that were laying the groundwork for the internet, the components.
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things that did very, very well. And we knew the internet wouldn’t exist without them. So that was a very successful way of handling it. In the same sense as well, one of the things that you must do during hype cycles, because again, because everything becomes ridiculously overvalued, is you need to take profits. You need to take profits. I mean, you take a look at Nvidia.
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Take a look at Nvidia. Yeah, again, I don’t think I’ve ever seen a stock like this over the past several years. You really haven’t. But in the same sense, there are days where, I’ve got clients that have been around for 20, 15, 10, five, whatever it may be, that have owned it in their portfolio and we’re taking profits in the position as the position grows in size. There’s nothing wrong with that. You reallocate assets. You take profits off.
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the table. If it’s, you know, someone got a larger position, you utilize options and writing covered calls to protect that position. So on the same day, on the same day I might be selling some Nvidia for one client and buying it for somebody else. That’s again, I think it’s a strong company, fundamental company. I understand that we’re in a cycle right now, but I also understand that
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Every Tom, Dick and Harry company out there wants to utilize this technology to make their company more productive, to make more money. There was a story here. Millions of fast food workers could lose their jobs within five years. Here’s why. And they’re talking about how AI could replace food, fast food servers and cooks over the next five to 10 years. And not only that, but…
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the advances that they’re doing already with computer kiosks, they’re finding that the robot voices, the AI running the kiosks or the drive through window do a better job than human beings do in upselling people at the window and making more money, which is fascinating. So all of these companies out there thinking about this is, I want in. I want in. So you’ve got a mass rush to the doors.
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FOMO fear of missing out. It’s FOMO for AI at this point in time Which is going to lead to a shit ton of froth Okay, there’s gonna be a ton of froth. There’s gonna be a ton of companies that go to ridiculous valuations There’s gonna be a ton of companies out there that have no idea what they’re doing spend money haphazardly and might go by the wayside as well Okay, what to take away from this again. We’re talking about trying to
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make money. You got to tread carefully here. Tread carefully in regards to what companies have really got an understanding of AI and what they want it to do. And again, we don’t know what the limitations are on this. We know what it can do up to this point. So what can companies do with this technology now? How is it going to help their bottom line? How is it going to make them more productive?
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Those are the companies as well that I’m looking at. There’s gonna be a lot of fly by night. Like I said, there’s gonna be tons of new IPOs. Every company out there is gonna say they’re an artificial intelligence company. That’s like we had every company tonight, dot com. Just attach a dot com to it. Or you get Obama in the White House. I’m a green company because I want government handouts. It doesn’t make any difference. The same thing is gonna happen during the dot com run up. And I…
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I talked about this before. How many brand new internet retailers came out at that point in time? And they were going public on almost a daily basis. One after another, after another. Just again, attach a.com to your name. There you go. You got yourself an IPO. Wall Street will underwrite you. They didn’t give a shit how bad your business plan was. They didn’t care. Investment banking fees, drive the thing up, trading fees, blow out the position. Woo-wee!
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Again, hype cycle. I’ve explained this since our philosophy. I realize that I’m not gonna be able to get you in at the exact bottom or out at the exact top. One of our investing rules of the road is, don’t lose money, don’t lose money. And a real surefire way of losing a lot of money is just throwing darts at companies in a hype cycle. And I’ll talk about retail.
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going back to the 1990s. How many internet retailers were there? It was countless, countless. I remember, I remember Henry Blodgett from Merrill Lynch. Henry Blodgett from Merrill Lynch, this is back in the day where it was like dueling pianos. Dueling pianos, it was dueling analysts. Who could put a higher price target on a company because as soon as they did that, they were on CNBC and they would raise their profile. They became a star.
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because of some outlandish prediction in regards to the share price of some company. Now, Henry Blodgett put a crazy, crazy price target on Amazon. You’re gonna say, well, he was right. Look at what Amazon has done. Yeah, show your work. I’m a big believer in show your work. Go back and you take a look at what he was basing that on was nothing.
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was nothing. He didn’t write in his analyst report that Amazon was gonna change its business model and get involved in cloud computing, which didn’t exist at that time and all of the deliveries. He didn’t see that. Again, he guessed right on that one, but so many of them just guessed wrong. What was the difference at the time between pets.com and Amazon? 1990s. What was the difference? Pets.com,
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sold pet food, pet paraphernalia, it was a pet store online. Amazon at the time sold books. That’s it. That’s it. Now how many other type of internet retailers were out there at that point in time? Amazon eventually changed, I’m changing, yeah, it’s changed its business model, grew its business model and became a company that.
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in my opinion, was worthy of my clients and my own investing dollars. Wait for that. Wait for that. Do not get FOMO. Do not get FOMO. Wait. Okay? It’s okay. Oh, it’s okay. Again, you’re not going to see the entire return, but you know what? You’re going to get a great return over time if the company is fundamentally sound. And again, you’re not taking on all of that risk.
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that unnecessary risk. Again, you know, man’s got to understand his limitations. I’ve said that often here on the program. I’m sorry, I don’t have a time machine. I don’t have a time machine. I don’t have Biff’s Almanac from Back to the Future II. I don’t have it. I don’t have it. So, again, you want to do things in a prudent way, this is how you do it. This is how you play AI. Watchdog on wallstreet.com.