A 'Guaranteed' Win? This May Be as Close as It Gets

by Andrew Zatlin September 08, 2023 1:00 pm ET

Nvidia is a stock market darling right now.

Thanks to its involvement with major trends like artificial intelligence, its stock has soared. In fact, it's doubled in the past six months.

Should you pick up shares? You could – or you could do this instead.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

A 'Guaranteed' Win? This May Be as Close as It Gets

Artificial intelligence ("AI") is all the rage.

ChatGPT, an AI-based "chatbot," is on track to bring in $1 billion in sales in its first year. Meanwhile, the Pentagon is using AI to enhance drones, part of $3 billion in funding this agency will receive for AI-related developments.

A billion dollars here, $3 billion there – what if I told you that these amounts are pittance compared to how big the AI opportunity is?

And today, I'll explain where the big bucks are going, and how investors like us can grab our share.

Infrastructure Is Key

Whether you're talking about a consumer-facing application like ChatGPT or a military application like enhanced drones, everything AI-related relies on a high-tech infrastructure...

And it's here where the big investment dollars will flow as AI ramps up.

Consider those drones I mentioned earlier. The Pentagon has earmarked $3 billion for these flying machines. But think about it: the tangible materials to build them don't cost anywhere near $3 billion. But the servers and software powering them (i.e., the infrastructure) can be expensive.

And the central component to all servers and software is semiconductor chips...

Asserting Its Dominance

It's hard to overstate the importance of powerful semiconductors when it comes to AI.

The U.S. has made it a top priority to produce the best semiconductor chips. You learned about the $3 billion headed to the Pentagon. Then there's the $52 billion that's been earmarked for semiconductors as part of the CHIPS Act.

Furthermore, America has been working with global partners to prevent cutting-edge semiconductor manufacturing equipment from getting to China.

You see, the U.S. wants to ensure dominance over China. And that means superior semiconductors.

And when we're talking about semiconductors, one company in particular has been in the spotlight...

A Stock Market Darling

I'm talking about Nvidia (NVDA).

Interestingly, Nvidia got its start as a boutique semiconductor company. Back in the day, gaming was on the rise. But chips made by companies like Intel (INTC) weren't strong enough to offer a seamless gaming experience.

A much more powerful chip was needed. This chip would become known as a graphics processing unit ("GPU"). And the main supplier would be Nvidia.

Fast-forward a bit, and cryptocurrency mining became popular. That's when miners discovered that Intel chips were ok, but Nvidia graphics chips were demonstrably better.

Nvidia's business boomed. Now it's continuing to rise as more companies discover that its chips are better suited for AI applications than your run-of-the-mill Intel chips.

In the past six months, shares of Nvidia have more than doubled. And investors are flocking to get in, hoping to ride this AI chip wave.

Should you join them?

Not So Fast

I'm not so sure. You see, it might be too late to profit handsomely from Nvidia's role in AI.

As I mentioned, its stock has doubled already this year, meaning the excitement and buzz has largely been baked in.

Then there's the possibility that another company steps in and tussles with Nvidia. Companies like Advanced Micro Devices (AMD) or Intel are still major players, and could cut into Nvidia's profit potential.

So, here's an idea for you: Let's aim to invest in a company that's in position for success no matter which semiconductor company comes out on top. Intel? AMD? Nvidia? It doesn't matter how the race shakes out...

Because the company I have in mind is connected to all of them, setting up the closest thing to a "guaranteed" win I can think of.

If you're a Pro subscriber, I'll reveal this company and the details behind an investment. We're in it to win it. Zatlin out.