Market On Open - Wednesday 22 November

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The AI Bubble LOL

Nvidia printed its Q3 earnings yesterday after the close. If anyone wants to tell you that this AI thing is a bubble, not real, whatever, I suggest you point them to the NVDA Q3 numbers. The company put in an incredible +206% YoY revenue performance, meaning +57% YoY TTM revenue performance - on a TTM revenue base which now sits at $45bn. And if that wasn't enough look at the gross margins, EBITDA margins and cashflow margins.

Source - Company SEC filings,, Cestrian Analysis

That's evidence of the importance of AI in the tech landscape today. AI is undoubtedly not as powerful as claimed, but there are real advances in machine learning, processing and content creation that are happening; the compute power that this next paradigm demands is massively greater than the last generation of hardware, software and networks (yes, networks - look for capacity upgrades in public and private networks to be a coming spending wave). Tech capex can sustain an up-move in the Nasdaq and now the S&P and the Dow too (remember both MSFT and AAPL are Dow-30 constituents, as is INTC, CRM, CSCO ... the Dow is now Grandpa Tech!).

So if our bull case for the Nasdaq is correct and if it has any fundamental underpinning whatsoever, it's likely tech capex, which is to say, capex. There isn't a major company in the world today that isn't spending money on AI one way or the other. Comparisons to the dot-com bubble are erroneous from a stock price perspective to my eye, or at least, from a valuation perspective, but where the comparison is absolutely correct is that in the mid to late 1990s, companies everywhere were scrambling to work out what this World Wide Web thing meant for them, what they should do with it, how to do it, and so on. Most everyone knew it was going to be a Big Thing but it took at least 10-12 years for large corporates to find their feet in the new world. Likely AI is the same. But along the way we think a lot of GPUs, CPUs, VCSELs, PHYs, software applications, operating system upgrades and consulting hours are going to get sold. A lot. As in, a lot-lot.

Right. Onto our charts for the day.

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