Nvidia (NVDA) dropped slightly on Thursday afternoon. CapWealth founder and chief investment officer Tim Pagliara joins Market Domination Overtime to give insight into Nvidia’s recent performance and key concerns for the tech giant and its customers.
Pagliara explains that a “better bet” than Nvidia is to invest in the companies that provide the supporting infrastructure for AI: “I mean, no one really talks about it, but a Google search today compared to a Google search with AI takes 10 to 15 times as much energy, and that hasn’t really hit the market yet. And so I see energy companies, GE Vernova (GEV) as an example, as really benefiting from that. So you can make money around the edges in a more sustainable long-term way because our utility, industry, our grid, all of that needed upgrading anyway.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.
This post was written by Nicholas Jacobino
Video Transcript
Chairs of NVIDIA sing a sell off midday link to the tech giants of clients.
Today.
Our next guest today sees a big concern with NVIDIA and its customers for more or let’s welcome in Tim Pagliaro Cap Wealth Chief Investment Officer, Tim.
It is good to see you.
So uh maybe we’ll start there, Tim with NVIDIA, you know, investors have piled in Tim.
The street loves this name.
I mean, nearly 90% of analysts who cover NVIDIA say you should buy it even here, but you’re, you’re cautious about, about NVIDIA.
How come?
Well, for the very reason that there’s so much consensus, you know, uh I think it was a 10 day in a 10 day period, NVIDIA added more market cap than Warren Buffett created in Berkshire Hathaway in 60 years.
So that has to give everybody a little bit of pause about, you know, where things were headed.
I was asked in an interview um yesterday about which tech company will hit the $4 trillion mark first.
And I said, well, I, I think you gotta break that into two parts.
Um You know, which one will hit first and then which one’s gonna be sustainable at a $4 trillion company and I chose Microsoft.
Um But I think Navidi will probably at this point hit first just because of the, the, the fervor and consensus that everybody thinks that you’ve got to own that to be successful.
Long term, Tim.
Um It’s Julie here when you look at NVIDIA, what is, what is your extrapolation to the rest of the market?
In other words, is what’s going on with NVIDIA?
A risk sign for the rest of the market or do you think that it’s just sort of specific to it?
I think it’s a little bit of both.
Um But, but I think, you know, for the value investors, the people look in places where no one else is looking.
I think it’s a great opportunity because, you know, you have NVIDIA, the market cap of it exceeds energy, it exceeds utilities, it exceeds the value of GE the, the last time we went through something like this was in 1998 1999.
Ironically, the darling of that era was Coca Cola.
It had been on a, an 18% per year, compounding 21% annual increases in dividends.
And you could have taken a dozen companies and you could have owned those or you could have owned Coca Cola.
It’s the same thing with NVIDIA right now.
You can own the entire energy complex, the entire utility complex, General Electric or you could own NVIDIA you could have 15 intels I think is the number or maybe a little bit more or you could own NVIDIA.
So, uh how sustainable that is ultimately with long term earnings and profits, given the inherent nature of the chip industry.
You know, it’s, it’s not a good bet from my standpoint.
So, in my experience, so, Tim, uh what would be in your opinion, a better bet?
A smarter bet right now, give us some, some ideas of where you would be more comfortable committing capital.
Well, I think it’s, you know, when you look at artificial intelligence, we we look at kind of a a pick and shovel type of approach like in a goal rush, you know, sell the shovel, sell the picks.
Um in this instance, you know, it’s the electricity, you know, complex.
I mean, no one really talks about it.
But, you know, a Google search today compared to a Google search with A I takes 10 to 15 times as much energy um A and that hasn’t really hit the market yet.
And so I see energy companies, you know, Ge Ver Nova as a as an example, um is really benefiting from that so you can make money around the the edges.
Um I think in, in a more sustainable long term uh way because our utility um industry, our grid, all of that needed upgrading anyway.
And this is just going to accelerate the need for that.
Um You know, a lot of those um stocks have been bid up as well this year and their valuations, one could say uh are getting stretched too.
But you think there’s, there’s more upside uh for, for the utilities and some of the other sort of infrastructure providers selectively on a valuation basis, they still look, you know, much cheaper and more sustainable long term.
I mean, the building out, you know, an energy complex building the grid.
That’s not that, that’s a probably a, a 1520 year process um at, at this point.
So I think there’s AAA really long runway, you know, intel, for example, um if you look three years out, five years out when they get their cap back um starting to churn out revenue, they’ve got AAA very, very bright future.
You know, they already have a chip that they claim is gonna be faster than the videos.
There’s not a a and again, I’m not, I’m just trying to put a cautionary tale.
Um and, and some reasons where investors should be cautious because this is where people lose a lot of money.
You guys have talked about it.
You know, people have been around a long time, look at Cisco, you know, Cisco had the largest market cap of any company in the world when these things turn it’s a long recovery.
You know, people forget it took 13 years for Microsoft following the peak in 2000 just to get back to where it was.
That’s a long time for investors that are used to making money every day.
Yeah, good reminder, Tim.
Thanks a lot.
Appreciate it.
You’re welcome.
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