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Did you see the Bloomberg headline, “Apple is working on a dedicated chip to power #ai”?

No!

Or, “Samsung Electronics sweeps coveted global AI awards”

No, I didn’t see that either!

You see! I told you this “AI” boom is for real, NVDA hasn’t gone up 188% this year without good reason!

Yes, but then why didn’t you tell me that on 26th May 2017 or 23 November 2018 when those articles were published…..?

What? I thought AI was a new thing!

Oh no,

What do you think powers Alexa or Siri
Or your YouTube and Amazon recommendations
Or your Facebook feed
Or autonomous driving
Or the best route on WAZE
Or your predictive text function?

Is that all AI?
Yes
Oh

But let’s do some #numbersnotnarrative

Over the past 10 years, Nvidia’s cumulative free cash flow has totalled $31bn and they spent $13.7bn repurchasing shares

Oh, so their shares in issue declined?

Not exactly, in Jan 2013 they had 2.44bn shares outstanding and Jan 2023 it was 2.47bn shares

Meaning they marginally increased as employees cashed in their awards – i.e the buybacks simply offset the dilution

Companies call it, “returning cash to shareholders”,

but I call it, “giving cash to employees”

So deduct that $13.7bn on buybacks from the £31bn and ordinary shareholders are only $17.3bn better off

Meaning if you pay $1trn for Nvidia today, you’re paying 58 times the CUMULATIVE FREE CASH FLOW that has accrued to ordinary shareholders over the past 10 years

Yes, but maybe that’s what the AI boom is worth

Is it though?

Because you should remember that the $17.3bn includes all the free cash flow from the

Gaming boom and the
Crypto boom and the
Cloud boom and even
some of the AI boom as I’ve just illustrated

And even if there is a new new AI boom

Now that Apple and Samsung and Qualcomm and Meta and all the locked-out-of-the-market Chinese companies and whoever else, are all developing AI chips,

maybe, just maybe, there won’t even be $17.3bn left over for NVDA shareholders…

That’s ridiculous, all the analysts are forecasting that this AI theme is going to be HUGE

Do they now?

Well, I hope these analysts are way better at forecasting than those who covered the:

Work from Home theme
or the Food delivery theme
or the Wind energy theme
or the Vegan theme
or the Buy Now Pay Later theme

Because “theme or meme”, you lost 80% – 95% on many of those theme leaders

Of course maybe this time it will be different,

But I doubt it

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