A comment from Sean Peche, Portfolio Manager at Ranmore Fund Management on Nvidia. It was reported today in City AM that Nvidia has become the third most popular stock in the country thanks to a boom in AI-focused investments, which are continuing to thrive in the UK retail marketplace.
However, Sean shares views similar to those of the ‘star fund manager’ Terry Smith, in that while Nvidia is a fantastic company, it might not be a fantastic investment.
Sean Peche, Portfolio Manager at Ranmore Fund Management, commented,
“We fully understand and concur with Terry Smith's stance on Nvidia. Nvidia is a fantastic company, but if you overpay for the prospects of great businesses, they can still be very poor investments. Especially in the tech world where competition is rife. Nokia, Netscape, and Nortel were all once dominant 'gorillas' in the tech world with great prospects, but if you bought them when they looked like they’d dominate forever, you lost a lot of money. Even Intel's 'moat' in chips seemed unassailable until recently.
What makes Nvidia different from other tech companies is that their many of their large customers are trying to develop their own AI chips, and many of these companies have R&D budgets that are many times Nvidia’s. Cisco never had customers trying to compete with them, and yet if you bought that company in early 2000, it took you 18 years to break even. What’s even worse is that at one point in 2002, you were down 90% on the 2000 high. That’s the danger of overpaying for good businesses.”
