Looking to invest long-term in Nvidia? Here’s how to play the stock according to one growth investor
U.S. chipmaker Nvidia has been getting a lot of love from market watchers this year – and growth investor Nick Griffin is no exception. The founding partner and chief investment officer at the Australia-headquartered Munro Partners says he has “always liked” Nvidia, even while it might be considered “a very difficult stock to own.” Nvidia “is in about 700 ETFs [exchange-traded funds] and it goes all over the shop. I think I said at the start of 2022 that I thought Nvidia would be the biggest company in the world – and it fell 60% that year and has since risen another 300% since then,” Griffin said during CNBC’s Pro Talks . Year-to-date, shares in the chipmaker are up nearly 200%, even as it experienced a pullback in the past week following the U.S. government’s curbs on the export of artificial intelligence chips to China over concerns they could be used for military development purposes. This will restrict the export of chipmaker A800 and H800 chips, according to the officials. Prior to this, Nvidia’s H100 chip had been banned for sale as part of restrictions by the U.S. government. NVDA YTD mountain Year-to-date share price of Nvidia Griffin does not expect this phenomenon to have a significant impact on the company in the long-term. “Nvidia makes the most important semiconductors in the world and everybody wants to get their hands on them. So, short-term, I understand the negativity – but long-term, it’s not going to change the fact that people want to buy their chips,” Griffin said. Some 53 analysts cover Nvidia, with 33 giving it a buy rating, and 18 giving a strong buy according to FactSet data, at an average price target of $630.06 – which represents an upside potential of around 50%. ‘Getting ahead of itself’ Griffin – who has had holdings in the chipmaker for five years – notes that it has had the habit of “getting ahead of itself” and “getting oversold … because of all the noise around it.” “The company is executing on a roadmap they have effectively told us about for a decade. From our point of view, I think [with] Nvidia, you find the size you want to hold it at and you hold it and you don’t trade it. I think you’d be perfectly comfortable at the sort of size to hold over a number of years,” he added. For instance, Nvidia has been talking about powering its graphic process units with generative artificial intelligence, even before the trend picked up. The company currently holds a sizable market share of around 85% in GPUs (graphic processing units) and close to a 100% share in the server market, Griffin said. Going forward he foresees an increase in the demand for GPUs – which would possibly chip away Nvidia’s market share to around 60%. This trend coupled with an expansion in Nvidia data centre sales spend would give the company an earnings per share of around $30 to $40 by 2030, Griffin estimates. While this may mean a loss of market share to its fellow chipmakers, the growth investor believes that Nvidia is in “a very unique position.” “The whole industry was going one way and Nvidia was going the other way. And not just the last couple of years, [but] for decades. And now the whole industry has come to where Nvidia is. But the funny thing is, Nvidia has all the developers on Cuda that they need to program these products, and they have the best chips to program these products,” he said. Cuda is Nvidia’s computing platform and application programming interface that allows software to use certain types of graphics processing units for general purpose processing. Nonetheless, Griffin does expect the chipmaker to face competition as the industry plays catchup and a “second player” that would build its own chips and software, emerges. The growth investor – who manages around 4.3 billion Australian dollars ($2.7 billion) in assets — focuses on investing in equities. The Munro Growth Fund he oversees has been up some 9.9% since its inception in 2016.
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