Generally folks have to simply accept that we don’t all the time make the very best funding choices. Due to this fact, I believed I’d flip to ChatGPT and ask it to call the highest progress inventory within the S&P 500.
Which one is generative AI’s favorite?
The generative synthetic intelligence (AI) software initially gave me a listing of six firms from the index. Know-how big Nvidia (NASDAQ:NVDA) was the primary title on the record. Shock, shock.
The opposite names have been Amazon, chipmaker Superior Micro Gadgets, defence firm Axon Enterprise, and cybersecurity agency Fortinet.
”Are you able to slender it down to at least one firm?” I subsequent requested it. Nvidia was the reply.
The rationale given was the corporate’s domination of the graphics processing unit (GPU) market and management within the AI revolution. It touched on the tech big’s costly valuation, however thought this was justified due to the corporate’s sturdy progress and outlook.
In all truthfulness, this didn’t enlighten me. The factors it offered have been very fundamental and generic, so, I used to be considerably upset.
My ideas on Nvidia
I agree that Nvidia is a good firm. Its progress frankly astounds me. Income is about to rise by a staggering 112% in FY25. It’s then anticipated to rise by 52% in FY26.
Attaining this degree of progress as a small firm is troublesome. Nevertheless, it’s significantly thrilling to see the corporate flip $27bn of gross sales in 2023 into an anticipated $196bn by 2026. For a blue-chip inventory, that is significantly spectacular.
The success can also be feeding into its backside line. Within the final quarter, earnings elevated by 168% 12 months on 12 months.
For that reason, the inventory worth has risen by 859% for the reason that begin of 2023, main many to imagine Nvidia inventory is pricey. Nevertheless, I disagree with this notion. I truly imagine its ahead price-to-earnings (P/E) ratio of 32.8 is reasonable for the agency.
Nvidia’s GPUs have gotten a cornerstone within the AI sector. It additionally appears more likely to dominate the AI arms race with progress charges which might be far superior than the already sturdy compounded annual progress fee (CAGR) of 37% for the business.
One concern I do have in regards to the firm is potential Trump tariffs. If supplies to supply its merchandise turn out to be dearer due to these, it might have a really detrimental influence on the corporate’s earnings.
My qualms with ChatGPT
I need to end this text by saying that whereas I perceive why it selected Nvidia as its best choice, I’m upset that it missed out Palantir (NASDAQ:PLTR) from its preliminary record.
The corporate was the largest winner within the S&P 500 in 2024, with its shares rising by 341%. It is because it’s additionally experiencing accelerated progress from the rise of AI.
Nevertheless, possibly the generative AI software had its purpose. For an organization with a market cap of $155bn, Palantir’s trailing 12-month income of $2.6bn is regarding. Any weak point might ship the inventory worth falling. For instance, an insider offered $36m of Palantir inventory a couple of days in the past (7 January), which prompted an 8% share worth drop.
Regardless, I don’t assume ChatGPT offered me a lot use in my quest to seek out the very best progress inventory within the S&P 500. I imagine it’s nonetheless higher for an investor to do their very own thorough analysis as an alternative of utilizing AI for stock-picking functions.
