If you invested $1000 into NVIDIA stock at the peak
in March, you would have $215,011.00, but that doesn't necessarily
mean that NVIDIA is a good investment going forward.
To understand what was going on here myself, I hired
a financial analyst to do a deep dive on Nvidia's
parabolic rise, and what we've discovered here is absolutely shocking.
If you personally own NVIDIA stock or are thinking about
buying it, you don't want to miss this video now.
In addition, this analyst put together a list of 10
stocks that could be big winners in the future, as
well as three that he has on his watch list.
Hundreds of hours went into this research project, as well
as a lot of money on my part.
So if you enjoy this type of content, please make
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the YouTube algorithm.
Let's start off with NVIDIA and the reasons behind this
meteoric rise in the share price.
Simply put, tons of companies want to build chat bots
as well as AI enabled solutions, and NVIDIA sells the
hardware that makes all of that possible.
It's GPUs which are essential for running advanced artificial intelligence
algorithms have become the industry standard now.
This rapid scaling up in demand has caused Nvidia's revenue
to skyrocket.
But keep in mind that the stock market is forward-looking,
and everything has to fall into place perfectly in order
for this share price to be sustained.
Now, the projected value of the artificial intelligence market is
set to hit 305.9 billion in 2024.
It's then expected to grow at a compound annual growth
rate of about 15.8% between 2024 and 2030.
But here's the first reason for concern about Nvidia's seemingly
unsustainable share price.
The AI market no doubt saw substantial growth in 2023,
with expectations of continued robust growth into 2024.
However, that growth rate is expected to decelerate and become
far more conservative going into 2025 and beyond.
It's the opinion of our analysts that the surge in
stock price observed recently is believed to be an emotional
response to the latest technology, and it's expected to undergo
a correction by 2025.
But just how overvalued is NVIDIA at this point in
time?
You're going to want to buckle up for this because
I'm about to blow your your mind.
the PE ratio is one of the most widely used
valuation metrics out there, and it tells you the price
investors are willing to pay relative to a company's ability
to produce $1.00 of annual earnings.
Now, each industry out there has their own norm relative
to growth prospects, and the semiconductor sector has a much
higher than average PE ratio when compared to the rest
of the market.
Right now, the Semiconductor sector is valued at a remarkable
price to earnings ratio of 62.1, which significantly surpasses the
historical 10 year average of that sector, which was 25.2.
Our analyst believes this discrepancy highlights a clear misalignment between
the growth in stock prices and the growth in earnings
and revenue, suggesting deep overvaluation within the Semiconductor industry.
Simply put, investors broadly are paying more than double what
they have in the past 10 years for exposure to
$1.00 of annual earnings from this sector.
But here's the crazy part.
Even within this massively overvalued sector, NVIDIA still stands out
as overvalued.
Utilizing the price to sales multiple, which is another popular
valuation metric, Nvidia's pricing is higher than 98% of its
competitors who are in the same sector.
Our analysts found this to be true across other critical
multiples including price to operating cash flow, price to free
cash flow and price to earnings, which we mentioned already.
In order to put a reasonable valuation on NVIDIA, our
analysts deployed the discounted cash flow approach, which is a
little bit complicated, but let me go ahead and explain
this in layman's terms.
Remember how we mentioned earlier that the stock market is
always forward-looking, while the discounted cash flow model allows you
to estimate the value of a stock based on predictions
about their future cash flows.
Now at the the time of his calculation, Nvidia's stock
was trading at 94298 a share.
And based on the anticipated growth of the overall industry
deploying the discounted cash flow model, our analyst believes the
intrinsic value of Nvidia's share price today is about 548
and 34 cents, which implies overvaluation of about 70%.
Overall, this analysis points to a significantly greater potential for
loss versus a gain at this point point in time
with Nvidia's share price.
But here's the crazy part.
The analyst pointed out that we have seen this exact
scenario play out before and he has significant correlations here
between this andthe.com bubble.
We'll get right into that comparison shortly, but first, a
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So how does this broad overvaluation of AI stocks compare
to the.com bubble?
Well, in the words of our analyst, the Internet boom
brought huge excitement for tech companies, especially those endingin.com.
At first, investors were so hyped about this new tech
wave that they threw traditional investing rules out the window,
betting everything on the next big thing.
Stories of incredible stock profits and people getting rich overnight
from tech shares fueled FOMO or a fear of missing
out.
This, of course, caused every one else to jump on
the bandwagon, sending stock prices sky high.
During that time, it was a brand new technology that
caused company stock prices to soar, much like what's happening
today with semiconductor firms including NVIDIA and Supermicro.
Notably, Supermicro recently experienced a pullback of around 25%, signaling
a potential cautionary tale and hinting at substantial future price
declines.
Now, for comparison's sake, here's a few articles from the.com
Bubble that our analyst flagged as a comparison for what's
going on today.
Dell's rise of more than two 100% in share price
helped it outperform its competitors.
By comparison, compact stock rose 90% during the year, and
Gateway climbed 36%.
Investors who held shares in troubled hardware makers Apple Computer
and Silicon Graphics were left holding the bag at the
end of the year.
Shares of Apple dropped about 25% by year's end, while
SGI shares fell more than 50%.
A number of notable Internet companies outperformed the NASDAQ by
leaps and bounds this year.
America Online AOL jumped roughly 146% during the year, and
Yahoo soared over 500%.
However, we all know how this story turned out.
Reality set in as investors began to realize many of
these companies were not profitable or even generating revenue.
In some cases, many didn't even have a real plan
beyond just having a fancy website.
The bubble inevitably popped in 2000, and the tech craze
came crashing down, leaving investors ravaged.
And just to show you how insane this time period
was, here's a visual of the PE ratios for many
of these companies at the time.
In hindsight, it was clear these were significantly overvalued, but
it's difficult to be able to see that while the
bubble is forming before it actually bursts.
After the tech bubble burst, tons of of companies found
themselves in a bankruptcy situation, including well known names like
altavistabroadcast.com, E Toys, and even Netscape.
Meanwhile, the companies that managed to stay afloat didn't see
their valuations recover to previous levels for 10 to 15
years or more.
Can you imagine that?
You buy a stock at the wrong time and assuming
the company even stays afloat after the bubble burst, it
takes you a decade or even longer to see the
share price come back up to the price that you
bought in at.
If you take a look at Cisco stock, which was
flagged by our analyst, you can see how investors got
locked in and had to either take massive losses or
ride it out for nearly 20 years.
In fact, Cisco stock has never actually reached the price
that it was trading@duringthepeakofthe.com bubble since then.
Now, stocks like Oracle and Microsoft had a similar situation
play out, but these did eventually surpass their peak of
the bubble share price about two decades later.
This chart here shows the average 20 year annualized returns
by asset class from 1992 to 2011 compared to the
average investor during that time period, the average investor had
an annualized return of 2.1%.
Meanwhile, inflation came in at 2.6%, so they actually lost
money over that two decade.
Our analysts also pointed out that we've seen similar bubbles
appear in the market since then, including the biotech bubble,
the 3D printing craze, the cannabis gold rush, and most
recently the electric vehicle bubble.
What's fascinating is they all share a common thread, which
is a groundbreaking or disruptive technology.
And here's how all of these cycles have played out.
First, a new game changing technology hits the scene.
After that early, investors jump in betting big on the
companies leading the charge and these early let's start paying
off with returns that beat the market average.
Then come the buzzwords, the headlines, and the success stories,
drawing even more people to invest in anything related to
the new technology.
And at this point, the FOMO or fear of missing
out hits and investors begin to skip their due diligence
and invest no matter what.
Confidence skyrockets and across the board, everybody starts to think
this time is different.
But inevitably, every single time the mood shifts.
Maybe it's the overall economy or a major player in
the industry that misses an earnings target.
All it takes is one event for the bubble to
burst, and very few are going to end up selling
at the top.
So that's the state of the AI industry right now.
But here's the interesting thing.
There's a handful of stocks that our analyst identified that
have significant growth potential based on their involvement in the
artificial intelligence industry.
However, they have been largely overlooked because everyone's focusing on
the big names and these particular stocks are not trading
in those bleed valuation territory.
It's important to remember here that I am not a
financial advisor and this is not any sort of financial
advice or a buy or sell recommendation.
You should always do your own due diligence and this
is simply a collection of stocks that you may want
to do further research on yourself.
With that being said, let's dive in.
First on our list we have Sprinkler, an AI powered
customer experience management platform.
Founded in 2009, Sprinkler has emerged as a key player
in customer experience management, providing a cloud based platform that
enables enterprises to engage with customers across multiple channels like
Facebook, Twitter and WhatsApp.
This company has a global footprint working with over 1400
different enterprise customers such as Nike and Microsoft.
Sprinkler leverages cutting edge technologies such as sentiment analysis and
natural language processing to to deliver personalized customer experiences.
Sprinkler recently posted its first profitable year with a net
income of 51.4 million and EBITDA of 49.41 million.
Regarding the balance sheet, the company demonstrates strong financial health,
boasting 656 million in cash and cash equivalents, which notably
exceeds its total liabilities of 429 million.
The customer service industry is facing massive disruptions from AI,
and as more companies lean towards adopting this new technology,
Sprinkler stands to benefit massively.
Next, we have DocuSign, the global leader in E signature
solutions and a key player in broader digital transaction management.
Now, this stock was a big winner during the pandemic,
but it became too obvious of a play and became
significantly overvalued.
Most people are only familiar with their core product which
is DocuSign E Signature, but here's a rundown of their
other products.
DocuSign CLM is a contract life cycle management system for
the entire contract process from generation to signing and beyond.
Then we have DocuSign payments.
This system collects payments along with signatures speeding up financial
transactions.
They also offer DocuSign click Wrap which is a digital
consent solution for simple agreements to terms of service and
things like that.
Lastly, we have DocuSign Notary providing an online notary service.
Currently, DocuSign commands the market with an estimated 75% market
share, having been a pioneer in electronic signature solutions.
In the past, DocuSign struggled with profitability, but the company
has improved significantly over the 2024 fiscal year, boasting 73.98
million in net income and 195.59 million in EBITDA.
In addition, DocuSign has showed notable balance sheet improvement by
reducing its total debt from 888 million to 143 million.
Up next, we have the parent company of Google, which
is Alphabet.
Alphabet boasts innovations in technology, delving also into healthcare, autonomous
driving, and more.
They also own YouTube, which has become a massively valuable
subsidiary.
Alphabet boasts an impressive balance sheet, holding approximately 119.94 billion
in cash equivalents and short term investments.
Its total debt is comparatively low at 29.05 billion.
Google Cloud, Which competes with Microsoft and Amazon, has achieved
a break even operating margin, experiencing substantial growth that significantly
impacts Alphabet's free cash flow, with projections indicating continued positive
trends.
In addition, Alphabet has also stepped up its share buyback
program, potentially mirroring Apple's approach, which will enhance the company's
earnings per share and consequently its stock price.
A lot of people have put Alphabet on the back
burner when it comes to comparing them to Open AI
and their ChatGPT product, but it would not be wise
to rule them out of the game.
Google Gemini may not be a big part of the
discussion right now, but I expect that to change in
the near future as Google is not known for simply
giving up.
In addition, they've also been rapidly rolling out changes to
the Google search algorithm to include AI generated answers at
the forefront.
Moving on, now we have UI Path, a global leader
in robotic process automation, or RPA.
This innovative company is transforming the business world by automating
the mundane rule based tasks usually done by humans.
Dubbed the Business Automation Platform, this company is bringing enterprise
level AI solutions to companies big and small.
UI Path Studio is a design tool with a drag
and drop interface for easy bot creation.
Then there's UI Path Orchestrator which manages and monitors bots
for secure, efficient automation.
UI Path Robots executes automated tasks across different applications.
Finally, we have UI Path AI Fabric, which integrates AI,
enabling advanced automations like document analysis and computer vision.
UI Path, which is often overlooked since its IPO, is
nearing profitability and has demonstrated substantial operational enhancements in recent
quarters.
From a balance sheet perspective, the company maintains a low
level of debt while holding substantial cash and equivalents.
Perhaps the most interesting part of what they do is
the fact that robotic process automation is designed to cut
costs and boost efficiency for businesses.
That makes justifying the cost a lot easier, especially if
it's saving a business more than the cost of the
software.
UI Path holds a dominant position in the RPA market,
and they are coming in well ahead of the rest
of the pack.
Here's another big name you've definitely heard of before, Salesforce.
This is a cloud based software company specializing in customer
relationship management or CRM.
Salesforce helps companies manage and make the most of their
relationships with customers across sales, marketing, customer service and other
business functions.
However, they have gone well above and beyond just offering
ACRM.
They now offer cloud based solutions for sales, services, marketing,
e-commerce and more.
Notably, in the AI realm, they offer a tool called
Einstein AIA, set of AI based technologies designed to integrate
directly with their flagship CRM product.
Among other things, Einstein AI is capable of creating predictive
customer journeys as well as designing personalized customer experience paths.
Since inception, Salesforce's revenue has consistently grown to remarkable heights.
They have also demonstrated remarkable improvement in both operating cash
flow and net income over the past year.
The balance sheet is in a robust state, boasting 14.2
billion in cash and investments contrasted with a debt level
of approximately 8 .4 billion.
In addition, Salesforce consistently grows its capabilities through acquisitions like
Slack, demonstrating their highly effective use of investment capital.
Next up, we have a smaller company you likely haven't
heard of before called Talkspace.
Talkspace is a leading online therapy platform that provides accessible
and affordable mental health care services.
They revolutionized access to mental health care, offering therapy and
other mental health support via text, live chat, and video
sessions with licensed therapists.
As far as the artificial intelligence component, Talkspace uses AI
for therapist matching, suicide risk detection, monitoring patient progress, offering
therapist support, and personalizing content recommendations.
Talkspace offers a cost effective alternative to traditional therapy, particularly
for those lacking insurance.
They also partner directly with employers and health insurance companies
to extend mental health benefits to workers and policyholders now.
Following a tumultuous period marked by the CE OS departure,
declining revenue, and significant operating losses, Talkspace has managed to
realign and is now on the path to profitability for
the first time ever in 2024.
The balance sheet reveals that the company is in a
strong position with 142.2 million in current assets against just
23.6 million in current liabilities.
The global pandemic has fast tracked telehealth adoption, especially among
millennials, and this is a trend that is expected to
persist, especially in mental health.
Lastly, our analysts pointed out that the company possesses qualities
that make it a prime candidate for acquisition by a
major healthcare entity.
If you frequently travel by plane, you've definitely seen the
next company on our list in action, and that is
Clear Secure.
This innovative company specializes in providing secure identity verification services
through its Clear platform.
Their business revolves around using biometrics like fingerprints and iris
scans to swiftly and accurately verify identities.
This technology is primarily used in airports to expedite security
checks, but it's also applied in other venues such as
stadiums and for various uses including health pass verifications.
But another interesting product that they offer is Clear Verified,
a business to business offering that extends the secure identity
platform to partners for creating friction free customer experiences.
Services like this can be used for companies required to
follow KYC or Know Your Customer laws.
In addition, Atlas Certified is an automated solution for verifying
professional licenses and certifying data across various industries.
Over the past two quarters, the company's income statement has
shown notable improvement, positioning it back on the path to
profitability.
Clear Secure recently enhanced its buyback program by 100 million,
retiring 84.9 million worth of shares in quarter one of
2024, equating to 6% percent of its market cap.
Up next we have Cisco.
Cisco Systems is a technology giant specializing in networking hardware,
software and services.
Their core competency lies in building the infrastructure that powers
the Internet and enables connectivity for businesses and organizations worldwide.
From data centers to firewalls and even VPNs, Cisco nearly
does it all.
Typical customers for Cisco Systems are businesses large and small,
telecommunication companies and Internet service providers, as well as schools,
universities, and government agencies.
Cisco is generating consistent revenue, with its income now being
stable and predictable.
In the last quarter, it reported 16 billion in operating
income and approximately 13.4 billion in net income.
However, it's worth noting that Cisco is not currently experiencing
a high rate of growth.
Instead, the company is focusing on strategic acquisitions to enhance
its revenue, with the recent purchase of Splunk being a
prime example.
Looking at the balance sheet, Cisco demonstrates financial prudence maintaining
a manageable debt level.
Next up, we have a company that many have probably
interacted with at various points in our lives, and that
is Match Group.
They own and operate a vast portfolio of dating apps
and websites.
To name the most popular, Match Group owns Tinder, Hinge,
OkCupid, match.com, Plenty of Fish, and more.
AI is being rapidly deployed across dating apps to improve
matches and drive more user engagement.
Match Group has experienced some challenging quarters in the past,
with stagnant revenue and fluctuating net income.
Nonetheless, the company appears to be returning to a growth
phase, albeit at a modest single digit rate.
But the uptick in earnings has yet to be mirrored
in the company's stock price.
Match Group's quick ratio is at 2.2 and its current
ratio is 2.39, indicating that the company's liquidity position is
adequate.
However, they do have a sizable amount of long term
debt, coming in at 3.8 billion.
The debt payment is spread out until 2031.
They've had to deploy a lot of cash in the
past to build this broad portfolio of different dating apps.
The last stock on our list before we get into
the three watch list stocks flagged by our analyst.
IS3M3M is a multinational conglomerate known for its wide-ranging services
both in the United States and internationally.
The company operates through 4 primary segments, Safety and Industrial,
Transportation and Electronics, Healthcare, and Consumer.
The income statement reveals consistent revenue, yet there's a noticeable
decrease in net income.
This decline is significantly attributed to litigation expenses related to
the military, earplugs and environmental liabilities concerning PFAS chemicals, however
these should be shorter term headwinds.
3 M is utilizing AI as well as deep learning
to optimize and improve their health information systems.
Overall, 3 M has maintained a strong balance sheet as
well, boasting significant operations, creating cash flow of 6.6 billion.
Ratio analysis indicates that Three M is valued more attractively
than competitors like Honeywell and General Electric, as well as
the sector benchmark.
Overall, despite an anticipated lack of revenue growth in the
near term, 3 M presents itself as a compelling value
opportunity.
In addition, 3 M is among the highly coveted list
of Dividend Aristocrats, meaning they have both paid and grown
their dividend every single year consecutively for 25 years or
more.
The last section here is going to be the three
watch list stocks that were flagged by our analyst.
These companies have interesting prospects, especially through the lens of
AI.
However, the analyst felt that these were either overvalued or
fairly valued at this point in time.
Nonetheless, they might be worth keeping an eye on, especially
if there is a pullback in that share price.
The 1st watch list stock is Mobileye Global and this
company develops and deploys advanced driver assistance systems and autonomous
driving technologies and solutions worldwide.
Our analysts felt this stock was overvalued by about 32%,
but nonetheless the growth prospects for autonomous driving remain rather
interesting.
Next up, we have a company that many of us
are familiar with and utilizing every single day and that
is Adobe.
Currently fairly valued by the market in the eyes of
our analyst, it presents a reliable source of steady high
single digit returns, though it's it's not poised for any
substantial growth in the near term.
Adobe has been successful at pivoting away from their individual
licensing business model to a subscription business model, however all
of that has already been priced into today's share price.
In terms of the artificial intelligence component, Adobe is rolling
out AI across numerous products ranging from image generation using
prompts to AI assistance that make design and even research
work much simpler and far more user friendly.
And finally, we have Palantir Technologies, which is a very
interesting company, but our analyst felt it was currently overvalued
by about 40%.
Palantir specializes in software platforms that are designed for big
data analysis.
With customers ranging from Fortune 500 companies to massive government
organizations, Palantir should have a plethora of healthy revenue streams
going forward.
However, they have become a hot stock and the share
price has gone up quite a bit in recent times.
Now, if you guys made it to the very end
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In addition, let me know down below if you own
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