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Nvidia leads the way

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

On January 22, 1999, during the internet bubble's peak, Nvidia launched publicly at a mere $0.41 per share. Last night, following exceptional earnings, the stock touched an impressive $500, reflecting a 1,219% return in 24 years. Yet, Nvidia's emphasis isn't on past feats, but on future endeavours. And, after Jensen Huang, Nvidia CEO, set the bar incredibly high after their Q1 results, Nvidia has executed once again.

Financial markets and businesses constantly challenge our assumptions. Nvidia's evolution over the past year is awe-inspiring, largely credited to Jensen's meticulous two-decade strategy – and the time has come for Nvidia to reap the value of this meticulous planning. Given where we started the year, Nvidia is now on track to achieve 76% topline growth for 2023 compared to only 10% expected at the start of the year. However, it’s the growth in profitability from $6 billion in 2022 to an expected $23 billion in 2023 that is driving the stock price appreciation. One could argue that the stock price hasn’t kept up with the change in fundamentals.

Jensen elaborates on the growth catalyst, noting, “a new computing era has begun. The industry is going through two platform transitions, accelerated computing and generative AI. Data centres are making a shift from general-purpose to accelerated computing. The trillion dollars of global data centres will transition to accelerated computing to achieve an order of magnitude better performance, energy efficiency and costs. Accelerated computing enabled generative AI, which is now driving a platform shift in software and enabling new, never-before-possible applications. Together, accelerated computing and generative AI, are driving broad-based computing industry platform shift.”

What are customers purchasing? Cloud service providers (Microsoft, Amazon, Google & Oracle) drove exceptionally strong demand for HGX systems in the quarter as these companies undertake a generational transition to upgrade their data centre infrastructure for the new era of accelerated computing and AI. Consumer internet companies like Meta also drove very strong demand – for instance Meta highlighted that since launching reels and AI recommendations, these have driven a more than 24% increase in time spent on Instagram.

Importantly, virtually every industry can benefit from generative AI. For instance, AI copilots, such as those just announced by Microsoft, can boost the productivity of over one billion office workers and tens of millions of software engineers. Billions of professionals in legal services, sales, customer support, and education will be able to leverage AI systems trained in their field.

However, Nvidia can't champion this seismic shift alone. It is joining forces with enterprise IT giants such as Adobe, Accenture, Getty, Hugging Face, Snowflake, Service Now, VMware, and WPP, as well as system partners including Dell, HPE, and Lenovo. The recent collaboration with VMware aims to unlock an emerging bottleneck on the edge as enterprises require the capabilities to deploy accelerated computing on premise – the VMware and Nvidia collaboration is a key development for the next stage of generative AI deployment across all industries.

Much like Apple and Tesla, Nvidia offers a full-stack ecosystem, adeptly enhancing everything from data processing and AI modelling to real-time speech and computer vision. This efficiency translates to unmatched data centre cost-effectiveness and energy proficiency. Jensen insightfully marked this phase as "the iPhone moment" earlier this year. We're merely at the outset of this computing paradigm shift. While it might seem like a sudden shift, Jensen has been orchestrating this moment for over two decades, positioning Nvidia at the forefront of the accelerated computing revolution.

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KEY RISKS

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in Funds managed by the Global Innovation team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.
Some of the funds may hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.  

DISCLAIMER

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.

Storm Uru
Storm Uru
Storm is a lead fund manager of the Liontrust Global Innovation, Liontrust Global Dividend and Liontrust Global Technology funds. He has 12 years industry experience, including as a fund manager and trader and prior to Liontrust worked at Neptune Investment Management running global funds and covering the global industrials sector. He holds an BBS in finance and MBS in international business from Massey University, an MBA from Oxford University and is a CFA Charterholder. He represented New Zealand in rowing at the 2008 and 2012 Olympic Games, winning bronze in London in 2012.

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