The New AI Gold Rush


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Now let's get into what we reviewed.


Here are the 4 key things we went over:

  • Why Nvidia sparked a wild tech rally

  • Where the real money is being made in AI

  • How companies like Chipotle are coping with inflation

  • What the debt ceiling deal means for the market

And if you're too busy to listen to the entire recording, below we included a compact summary of what went down.

To get all the juicy details, just listen to the entire recording.

And now, onto the summary 👇


With a debt ceiling deal sealed, we're once again in a period largely being driven by winners and losers until we get more economic data. 

And last week revealed more winning trends with basically every tech company getting sent skyward by Nvidia's incredible revenue beat. 

This week's podcast focused a lot on the real winners in the AI space, and why our analysts are amazed to discover that Nvidia may still have room to justify their place near the $1 trillion market cap club. 

Meanwhile, we're finally getting a better sense of what wins and loses in the retail space.

Some mall retailers are finally finding their level after getting inventory under control while dollar stores and other 'budget' plays are getting kneecapped by lower margins and a death spiral into lower-margin products. 

We're in the most brutal period of this recovery while the Fed weighs the potential for one more rate increase this year. 

Let's dive into the opportunities and see what works 👇

The Real AI Revolution:

So last week's bigger highlight was Nvidia's astounding revenue beat that drove nearly $200 billion dollars of market cap in a single day. It is the single biggest  1-day increase in shareholder value ever. 

The wildest thing is, that value may be justified. 

Because Nvidia's revenue beat was due to a minor undervaluation the market has been giving A.I. plays.

We talked about this at length last month when we re-initiated coverage in the stock. Basically, even if AI is vaporware, NVDA has the opportunity to make money no matter what given their chips are both for training and deploying inference engines. 

The only place our analysts got things wrong in our assessment was the timing. Nvidia basically hit our projections for Q1 2024 in Q1 2023. And now they're on pace to boost revenue 52% in the next quarter. 

All of this growth is coming from the incredible demand for Nvidia's AI chip products.  Stocks in the AI ecosystem like Monolithic Power Systems, AMD, and Synopsys also saw huge gains after Nvidia basically redefined the opportunity the market sees in the AI industry. 

AI has been seen as a potential head-fake for a while now, but these astounding results from Nvidia silenced a lot of the doubters.

Nvidia is able to make money from several different points of the AI development cycle, meaning that they have meteoric growth potential ahead. 

Most of this new bull sentiment for AI didn't come from Nvidia specifically though.

Companies like Meta are completely redefining their value propositions by using AI models. We discussed some of the astounding numbers AI has put up for meta in an analysis last week

Basically, AI isn't currently driving value by replacing human labor. It's driving value by supercharging the most powerful algorithms on Earth.

The market doesn't fully care about chat GPT right now. The market cares about how inference engines are Meta are increasing the time spent on Instagram by 24%. The market cares about AI models at Uber finally making their core rideshare product more valuable than Uber Eats.

AI simply is a momentum play for the algorithmic businesses that were already winning in the 2010s. We're still waiting on AI to actually redefine other businesses,  but right now it is simply making the rich a little richer.

Winners and Losers in Retail:

Meanwhile, specialty retail managed to shine last week with surprise beats by the likes of Chipotle & Abercrombie and Fitch. Any store that is capable of getting inventory under control is going to win no matter how bad inflation gets. 

But certain sectors are finally getting punished. Basically, dollar stores like Dollar Tree are finally getting unseated as stable revenue drivers as their margins are getting hammered by inflation. Dollar Tree specifically is seeing higher rates of lost revenue to stealing, damage, and lost items.

Even worse, DT has been forced to shift to more consumable products that are lower margin. All of that combined to really hammer the stock over the last week. 

Expect a few more retail updates from the team as we parse who's going to win and lose moving forward. The longer we stay in this inflationary period, the more clear it becomes who is strong and who isn't. 

Wrapping This Up:

With the deadline extended despite a preliminary debt ceiling deal being reached, we still expect a bunch of volatility around the deal being finalized.

Don't trade your way around Congress, nobody wins that game. 

But we are very much entering a period where news slows towards summer. So our analyst team is shifting towards a company-by-company model to better understand what the long-term narratives are. This may all change in a few weeks if Apple manages to put out an industry-defining mixed-reality headset, but we're not holding our breath while we wait for that. 

The main thing to watch is these algorithm-based businesses as they continue to add AI to their tech stack. Nvidia will definitely win as we push through this, but how long will that trend keep up? 

We're glad to be in a market period like this. There are a lot of really interesting questions facing our analyst team and a lot of profit in finding the right answers. 

Keep your trades close and your hedges closer, volatility could still very well be around the corner.