Can Nvidia’s astronomical growth last? One outperforming fund manager weighs in
For many investors, the million-dollar question is how far Nvidia can go or whether it can sustain its dramatic growth. Nick Griffin, chief investment officer at Munro Partners, has invested in Nvidia since 2019 — but even he is taken aback by the stock’s astronomical run so far. “I have never seen anything like this in terms of the dramatic earnings acceleration it’s displaying … it’s never happened before to a company of this size, and it’s unprecedented,” he told CNBC’s ” Street Signs Asia” on Tuesday. Nvidia reported fiscal first-quarter earnings last Wednesday that beat expectations for sales and earnings on the artificial intelligence boom, and its shares passed $1,000 for the first time. It closed at $1,064.69 last Friday. Nvidia’s outlook Griffin pointed to industry estimates that showed Nvidia is set to sell $100 billion of its AI accelerators in the next 12 months. AI accelerators are processors designed to accelerate AI or machine learning applications. “So that’s hyperscalers, enterprise sovereigns — all buying $100 billion worth of this equipment so those people truly believe that this product will be transformational. Otherwise, they wouldn’t spend $100 billion and they’re expecting to get probably double that back in revenue at some point in the future,” he said. He added, “The simple way to think about this is: Are you using these products every day? … would you be prepared to pay for them? And the answer is we do use them every day in our business.” Griffin said that he’s seeing use cases in “lots of different verticals,” citing examples such as summarizing meetings, security threat detection and cancer detection. “Proper” AI assistants on smartphones are another possible use case. “So I can see quite literally thousands and thousands of applications here, and many of which I would probably pay for over the next three to five years, which means this investment is probably sustainable,” he said. But the stock’s performance is “definitely not going to be linear,” thanks to “overexcited” investors, Griffin cautioned. “But … we’re year one of this investment. So there’s a plausible argument that it will run for a number of years from here. Not just one year of hype,” he said. “If Nvidia keeps growing at this rate, it’s going to become the biggest company in the world — we’ve been saying that for years but didn’t think it would happen this quickly,” he added. In addition, he said, there’s another benefit of holding the stock: “Nvidia is growing faster than all the Mag Seven, yet trades at roughly the same multiple of around 30 times earnings.” Nvidia is currently the largest holding in Griffin’s Munro Global Growth fund. The fund has spiked around 30% in the past year till April 2024. In comparison, the S & P 500 was up around 20.7% in the same period, and the MSCI World Growth Index was up 24.21%. Griffin also manages the Munro Concentrated Global Growth Fund and the Munro Global Growth Small and Mid Cap Fund. He has been managing funds for more than 15 years, with a focus on growth equities. Here are the buy ratings and average price target that analysts give the stock, according to LSEG data.
