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The Ultimate Nvidia Stock Hedge, and the Truth About Big Tech AI Spending

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Worried abut the “AI bubble,” and especially how it could affect Nvidia (NVDA stock)? Chip Stock Investors Nick and Kasey explain what’s really happening, the real reason big tech is spending so much on Nvidia, and a financial metric to follow the cycle. They conclude this video with a discussion on stocks that can act as an “NVDA stock hedge.”

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Content in this video is for general information or entertainment only and is not specific or individual investment advice. Forecasts and information presented may not develop as predicted and there is no guarantee any strategies presented will be successful. All investing involves risk, and you could lose some or all of your principal.

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Chapters:
00:00 Introduction to Hyperscalers and CapEx Spending
00:08 Understanding the NVIDIA Cycle
01:13 Cash Reserves and CapEx of Major Companies
02:21 Key Metrics for Evaluating Hyperscaler Spending
02:43 Detailed Analysis of Google and Meta
05:10 The Importance of CapEx to Operating Cash Flow
07:10 Quotes from Alphabet and Meta CFOs
11:46 The Perfect NVIDIA Stock Hedge
12:31 Future Outlook for AI and Semiconductor Markets

Nick and Kasey own shares of Nvidia, Alphabet and Meta.

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35 comments

@tachiiderp December 17, 2024 - 12:26 pm
Hyperscaler earnings come out before nvda. So if they drop in growth rate they won't be acting as a hedge, they'll pull nvda down with them on the fear of lowered capex spending, fear of capex spending not leading to productivity, etc.
@ChôĐèoVawntv December 17, 2024 - 12:26 pm
❤❤❤❤❤❤🎉🎉🎉
@EllyMoody December 17, 2024 - 12:26 pm
Me: I've made a lot of money during 18 bullish months. This time I'm being responsible investing in ETFs.
Also me: Buying Spotify and Palantir.
@smithright December 17, 2024 - 12:26 pm
awesome analysis!! subbed
@MarkRosebklyn December 17, 2024 - 12:26 pm
Just a quick THANK YOU for this great insight. It has helped me enormously.
@susa2017 December 17, 2024 - 12:26 pm
Unfortunatel INTC would have obliterated you
@Dragonwrath0712 December 17, 2024 - 12:26 pm
Where can we see the chip stock investor portfolio?
@amysmereck5912 December 17, 2024 - 12:26 pm
I believe Meta is already offering some AI tools for advertisers to use to create ads. Spending money to make it easier for users to spend money with them seems like a good investment.
@missunique65 December 17, 2024 - 12:26 pm
the only thing ai did was distract the market from a recession. and make a lot of money for powell and his friends.
@marcoalbertospadacini3792 December 17, 2024 - 12:26 pm
When do you talk about "AI bubble"? How can I get back that video? I'm referring to what you say at 1:02 of this video.
@annasillanpaa1111 December 17, 2024 - 12:26 pm
Thank you, great again!
@KidrauhlUwU-ky1he December 17, 2024 - 12:26 pm
I bought NVDA after splitting $132 daily it’s taking my patience test both of you are beautiful 🤩 people with gifted calming voice 👏
@blakemann2365 December 17, 2024 - 12:26 pm
This is very good. I am actually very impressed with your reasoning and logic. FYI: I have been in PEVC industry for sometime.
@starmount326 December 17, 2024 - 12:26 pm
thank you for the quality video. I have invested in semi sector for years. But this analysis is just way better than that of most semi analysts out there.
@odoacredacalcutta5085 December 17, 2024 - 12:26 pm
it's honestly very sad to discover that Google and Meta are spending all that capex with the only aim to squeeze more money out of their users by targeting them better with ads.
@divalounger December 17, 2024 - 12:26 pm
I so appreciate your videos. And just to say thank you.
@jonm1066 December 17, 2024 - 12:26 pm
Would like more aehr videos. Hope they do well in their upcoming earnings 🎉
@maxbreak147 December 17, 2024 - 12:26 pm
thanks for doing the charts in a dark theme. so much easier on the eyes
@tomcarl8784 December 17, 2024 - 12:26 pm
I don’t think this is the correct hedge for NVDA. NVDA shares don’t need to be hedged against business cycles as the AI boom is only beginning, it needs to be hedged against a Taiwan invasion. NVDA is hyper exposed in this respect, and not only is this a possible event, it’s likely, and when it happens the mag 7 will also be brutally hit, and therefore not serve even remotely well as NVDA hedges.
@Kulturjunky December 17, 2024 - 12:26 pm
New to your channel. This was another great video, glad I found you ❤

Two companies from Japan I like are SCREEN Holdings and Disco Corp. Have you looked into those?

Best regards from Austria
@DrJoJoBoxer December 17, 2024 - 12:26 pm
If the hyper scalars are reducing their cap X, I am thinking it would be because they are Concerned about decreasing revenue or profits, they have finally been able to develop their own in-house chips and do not rely on Nvidia as much as they used to or other scenarios that would be an indication that it would go down in symphony with Nvidia. Sure leave there are better hedges. Am I missing something?
@Ronnieleec December 17, 2024 - 12:26 pm
What happens with older hyperscaler cloud servers: ampere, Intel and AMD? Do they re-task for lesser workloads or is there a secondary market for them? I suspect with such rapid cycling of semiconductors, the H100 serious will be obsolete for the big guys in a few years.
@heanne1542 December 17, 2024 - 12:26 pm
Would you invest in an semiconductor ETF
As I can not aford to buy all good companies
Thanks for a reply
@heanne1542 December 17, 2024 - 12:26 pm
Perfect as always thank you🎉
@mshparber December 17, 2024 - 12:26 pm
Can you please make a sort of brainstorm video, discussing some possible futuristic new opportunities, less visible today (not data centers). For example, usage of GPUs in home robots, etc. 🙏
@mshparber December 17, 2024 - 12:26 pm
Isn’t CAPEX depreciated by several years? When you say “when CAPEX go down the profits go up”, don’t you mean FCF go up? Because profits reflect the depreciation only, not the CAPEX itself, so the profit might not change that much immediately when CAPEX decreases…. Anyway, excellent stuff as usual, thanx a lot!
@robertwilliam9558 December 17, 2024 - 12:26 pm
The Rubin platform will be released by Nvidia in 2026. Hold Hold Hold
@kamillakjrvadodgaard5364 December 17, 2024 - 12:26 pm
Thank you! 🙏😍
@simonposener7601 December 17, 2024 - 12:26 pm
Nice video.. Just subscribed.. NVDA is by far my biggest holding... I am thinking about getting my son into VGT or SMH.. any thoughts... perhaps a future video...
@bigmountain19 December 17, 2024 - 12:26 pm
Thanks for doing this. Doing this internally is even harder. First you need to consider is this project introducing a new product or is it an efficiency play like installing a new erp, and lowering G&a expense as a % of revenue over time.

If it’s top line you need to think about the phase in, the phase out of the old, and any cannibilization. If it’s not a distinct product you need to allocate the bundle.

COS if it’s hardware you need to estimate the internal costing efforts and the external cost to build.

With R&D you need time tracking tools, or software coding tracking tools and need to assume the front end has been set up. You need to pass that info and to your FP&A team and have them log it into their system of record to track cumulative investment.

You need an allocation methodology for direct S&M and G&A.

It just gets really complicated and you need a lot of experience and people to execute all of which no public company is ever going to disclose to you.

Much better to assess your original thesis without the investment and your new thesis in terms of revenue growth, margin expansion, operating leverage or operating cash flow.

For operating cash flow it might make sense to include the amortization of the hardware as an add back because if you aren’t using free cash flow you don’t consider the investment.
@Matthewbyrd86 December 17, 2024 - 12:26 pm
Glad to hear some cycle commentary - this is important to watch for anyone who wants to tactically shift positioning (not advocating for that by any means, btw) from time to time.
@antonystringfellow5152 December 17, 2024 - 12:26 pm
"The semiconductor industry is cyclical" is a conclusion based on past performance and while it does seem likely that it will continue to be cyclical, the future will most certainly not resemble the past in this case. We are entering a new era.
You only have to look at the power of the latest models to see how fast this field is evolving. With each more powerful, more reliable model that's released, there's a corresponding increase in applicability. I expect further significant advances over the coming months, with the upcoming launch of GPT-NEXT, followed by Orion, likely over the next 1-4 months and I do not see this process slowing down yet.
Basically, what I'm saying is that we're VERY early in the game yet. As these models becoming increasingly useful, their adoption will increase. Every more advanced model will come with more use cases and more businesses being forced to use the technology in order to remain competitive.
I can't see how this won't have a significant effect on the cyclical nature of the semiconductor industry.
@nicoled5160 December 17, 2024 - 12:26 pm
This is one of the most quality shows on YouTube. I just love hearing about your research and a fun presentation. Thank-you.

Ps. Even your sponsors for videos are quality and thoughtfully selected.
@kjkgood December 17, 2024 - 12:26 pm
this is really good work thank you Ive been hearing accelerated computing since the beginning and all the "experts" are calling it AI,, well done !
@larsnystrom6698 December 17, 2024 - 12:26 pm
I wonder how Microsoft gets revenue from their AI investments.

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