James Anderson Ringoto Hedge Fund CIO
Tesla, Amazon Early Investments Build Industry Reputation
NVIDIA Profitability and Unique Position Highlighted
There is a forecast that the market capitalization of Nvidia, a leader in artificial intelligence (AI) chips, will reach $50 trillion within 10 years. Its high profitability compared to competitors and dominant position in the industry were cited as the driving forces behind the stock price increase.
James Anderson, Ringoto CIO [Photo by Ringoto website capture]
According to major foreign media on the 14th (local time), James Anderson (photo), Chief Investment Officer (CIO) of hedge fund Ringoto, said, "In the most optimistic scenario, Nvidia's potential scale could reach a double-digit trillion-dollar market capitalization much higher than anything we've seen before," predicting that Nvidia's market cap will reach $50 trillion within 10 years. He added, "If AI proves effective for customers and Nvidia maintains its lead, this will be a possibility rather than just a projection."
Anderson, known as an early investor in Tesla and Amazon, is currently regarded as the most successful IT investor in the industry. Regarding the biggest difference between Nvidia and other investments, he emphasized, "Tesla and Amazon did not start from a highly profitable and dominant position like Nvidia," adding, "Nvidia's continuous exponential growth, competitive advantages in hardware and software, and its corporate culture and leadership are exactly what we have been looking for."
CIO Anderson pointed to the expansion of profitability in the data center segment as the driving force behind Nvidia's market cap growth. He predicted that if the AI chip demand in data centers, which shows an annual growth rate of about 60%, directly translates into Nvidia's revenue growth, Nvidia's earnings per share will reach about $1,350 and free cash flow per share about $1,000 within the next 10 years. He set Nvidia's target stock price at $20,000 after 10 years. According to this scenario, Nvidia's estimated market capitalization would be $49 trillion, surpassing the combined market cap of all companies currently included in the S&P 500 (about $47 trillion).
However, Anderson cautioned, "It should be kept in mind that developing GPUs for AI takes a long time," adding, "The path for Nvidia to reach a $50 trillion market cap is likely to be unstable, and it would not be surprising if the stock price experiences multiple crashes of 35-40% along the way." Nvidia, which led the global AI boom with a 167% surge in stock price this year alone, not only reached a market cap of $3 trillion but also briefly became the world's largest company by market cap last month, surpassing Microsoft (MS) and Apple.
Regarding concerns about a bubble in the generative AI market, CIO Anderson said, "Narrow generative AI for basic consumer tasks may have been overvalued, but considering AI's problem-solving capabilities in autonomous driving, robotics, and new drug development, it is rather undervalued," and evaluated, "Nvidia is quietly but firmly leading the way in supporting and providing services in these fields." Currently, Nvidia's stock is trading at more than 47 times next year's estimated earnings per share.
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