Should you choose NVIDIA on Microsoft?

Question: Why did you pay 30 times profit for Microsoft actions (Nasdaq: MSFT) when you can buy NVIDIA shares for 33 times Gains? You would not do it, especially when you consider three simple facts:

1. Growth: Nvidia’s income is increasing at a much faster pace, on 80% annually in the past three years, while Microsoft’s income growth is there 12%.
2. Margins: The beneficiary margins of Nvidia are superior 60%This means a greater part of their income growth is based on profits for shareholders. On the other hand, the operating margins of Microsoft are also solid to 45% But lower than that of Nvidia.
3. Prices: The vast Cloud Computing services from Microsoft and its large business customer base are likely to protect it from the most serious consequences of prices. Nvidia currently has an exemption from semiconductors, protecting it from prices at the moment. In addition, the main players in the technological industry, such as Amazon, Google and Meta, should maintain their solid investments in the expansion of AI infrastructure, even in the current economic environment.

Image by Efes de Pixabay

Is Nvidia a safe bet?

Although the term “refuge” can come to mind for some, Nvidia’s past performance during market shocks suggest the opposite. For the context, here is how Nvidia behaved in past shocks. During the 2022 inflation shock, the NVDA fell by more than 65%. In 2020, in the middle of pandemic uncertainty, the stock dropped by more than 35%. More radically, during the 2008/2009 financial crisis, the NVDA experienced an collapse of 85% of value. Thus, the NVDA stock is not exactly a safety stock. Our dashboard How much can NVIDIA actions go to a market crash? has a detailed analysis of how the stock worked during and after market plantations.

However, it is important to note that Nvidia’s actions have already experienced a significant correction, going from a closing top of $ 150 at the start of the year to less than $ 110 now. For investors looking for a potentially more stable and very efficient alternative, consider Trefis High quality wallet. This strategy has outperformed the market with more than 91% yields since its creation, as its HQ Performance Metrics.

The domination of Nvidia AI

For optimistic investors about long -term growth and the generalized adoption of artificial intelligence, regardless of tariff considerations, Nvidia presents a potentially convincing long -term investment opportunity for its current valuation. This is mainly due to the fact that Nvidia occupies a unique position as a key “weapon supplier” in the booming race of AI. Rather than betting on the success of a single IA company like Meta, Google or Amazon, an investment in Nvidia is a bet on the fundamental infrastructure which feeds the initiatives of AI of all these main players.

Since the AI ​​breed is still in an emerging stage, companies are currently making substantial investments in this crucial infrastructure. For example, capital expenses of Meta’s technological infrastructure, Meta, around $ 65 billion, demonstrate the immense scale of this continuous investment in AI.

Potential risks to consider

Despite its convincing prospects, investing in Nvidia has inherent risks that investors should consider. One of the potential drawbacks is the possibility that the benefits are not expectations, or a significant deceleration of growth, from the current summit of around 50% to 30% more moderate in the short term, if companies favor the conservation of cash.

Another factor to consider is the potential for Nvidia customers to focus more and more on the development of more effective AI models, which could cause reduced demand for growing volumes of their chips. In addition, the stock is always sensitive to the negative impacts of unforeseen and currently unpredictable events. Given these potential risks, investors should be prepared for the possibility of a substantial disadvantage in the course of the action, potentially up to 40%. It is important to note that the sale during such a significant slowdown would probably be counterproductive for long-term investment objectives.

Long -term perspective

Despite these potential challenges, for long -term investors with a 3 to 5 -year horizon who are comfortable with volatility, Nvidia at its current levels could represent an interesting point of entry on the booming AI market. For those looking for strategies to navigate market slowdowns and potentially take advantage of it, exploring options such as the Reinforced value portfolio Trefis (RV), which has outperformed its entirely capitalized actions reference (Combination of reference indices S&P 500, S&P at mid-cap and Russell 2000) Producing solid returns for investors, or consulting a financial advisor with experience in the bear markets could be beneficial. Remember that a significant wealth can be generated on the market by those who maintain a calm and strategic approach during periods of volatility.