Why NVIDIA Isn’t My Favorite AI Stock

Dear Reader,

CJ here…

Ask almost anyone what their favorite Alternative Intelligence stock is, and the answer will be almost unanimous. I’m talking anyone!

A Wall Street analyst, your investment advisor, golf partner, neighbor, restaurant server – you get the idea… anyone.

Their answer is not the same as mine, I guarantee that.

And historically, my approach to picking stocks like this has a great record.

So let’s dive into it. Clearly everyone’s favorite AI stock is NVIDIA (NVDA). But I see better opportunities out there right now.

My analysis identified NVDA as a buy and hold in 2016, just ahead of the shares posting a 600% return. But right now, the same analysis and approach is suggesting there are other stocks worth more of a look than NVDA.

Here’s why…

It boils down to one word – “overcrowded.”

Overcrowding of a stock can bring the best investment down, hard.

It’s a simple concept. If everyone owns a stock it means two things.

First, that there are fewer – if any – prospective buyers in the market to bid the stock higher.

Second (and more importantly), if everyone owns a certain stock – like NVIDIA – it means that there is an overwhelming number of potential sellers of those shares.

Put simply, the number of sellers vastly outweighs buyers. This imbalance often leads to fast and furious selloffs when something happens with the stock.

Think yelling “fire” in a crowded theater scenario.

That’s Nvidia right now. The stock is sitting at some of its highest valuation while being one of the most crowded trades in the stock market.

The last time I bought NVDA shares as a long-term hold, the PE ratio sat under 20, and the percentage of analysts recommending the stock as a “buy” was under 30%.

That’s what you need to be looking for to find a few future AI performers.

You need to dig into the numbers, not the headlines.

Now I told you that I would name names on Tuesday. Here are two stocks that are attractive based on the numbers…

International Business Machines Corporation (IBM)

This is the original AI stock. Remember when Watson beat everyone on Jeopardy? Or when Watson beat World Chess Champion, Garry Kasparov?

Let’s get back to IBM…

After years of work, IBM has turned into a more nimble and agile company built to deal better with changing markets.

IBM is one of the companies that will benefit from the growth in the use of AI, not the development of the chips that power it. In other words, IBM hasn’t even started cashing in on the AI trend. In contrast, Nvidia Corporation (NVDA) has already cashed in and is likely to see their growth level off.

“Priced to perfection” isn’t a problem with IBM shares as the stock trades with a current price to earnings (pe) ratio of 65, well off of its highs.

The analyst recommendations and other data relative to sentiment show that this stock is far from “crowded.”

For example, current analyst recommendations show only 22% of analysts rating the stock as a “buy.” The vast majority of analysts currently sit with “hold” ratings. This suggests that the stock is ripe for upgrades as Wall Street begin to factor revenue growth from AI into the picture for IBM stock.

From a technical perspective, IBM shares have been increasing their relative strength against much of the technology stock universe. Shares are preparing to break into new multi-year high territory, a move that often attracts the attention of Wall Street analysts for upgrades.

The stock currently trades in a long-term bull market trend with its 20-month moving average trending higher.

Expect IBM to continue moving into the AI space with business solutions over the next six to 12 months, driving its price toward my target of $190.

Second up is another blast from the past…

Intel Corporation (INTC)

Like IBM, Intel made its mark in the technology sector decades ago and has spent the last decade trying to retool and reinvent.

The AI chip movement has bolstered companies like Taiwan Semiconductor (TSM) who play a role in manufacturing NVDA’s chips – but don’t count Intel out yet.

The company has started construction on domestic foundry and manufacturing plants as part of the effort to bring semiconductor production back to the United States. This long play on the AI chip manufacturing market should pay off large for Intel.

The market has yet to factor the long-term story into their expectations for Intel shares.

Like IBM, Intel’s analyst recommendations fall heavily in the “hold” category, with 21 of 29 analysts currently ranking the stock as a “hold.”

Similarly, the average price target on Intel shares is $32. That’s right, the analysts’ average target price is $4 lower than the current price of the stock.

Keep in mind that Intel shares recently formed a long-term technical bottom at $25 and just recently broke back into a long-term bullish price trend.

In addition, the company’s year-over-year quarterly earnings growth hit an all-time low of -36% in the first quarter of 2023. Catastrophic quarters like that often mark a bottom for stocks as Wall Street often capitulates at these extremes.

Bottom line, Intel has spent the last three years re-tuning their fundamental approach and looks to benefit from the second wave of AI driven growth and investment.

And as you know by now, AI has already cemented itself at the forefront of the future. In fact, more than 70% of Wall Street is already using AI to help pick their trades while the average person’s AI use is limited to online search engines like ChatGPT.

But of all the things ChatGPT can tell you in seconds, there’s one question that ChatGPT can’t answer: What stocks can I trade today?

You know who can? My friend and colleague, Tom Gentile.

He’s built an AI machine that can answer that question. It’s the first AI trading system created exclusively for Main Street investors – NOT Wall Street elites.

The best part?

Anyone can use it.

And starting on Monday October 16 at 1 p.m. Eastern, Tom’s hosting the first-ever Open House to show you how with one simple click, this system will tell youexactly what trade to take every single day.

The results have already been mind-blowing…

In just 14 months alone, his AI trading system has helped a small group of followers generate over 563% in overall gains, thanks to a slew of top-performing trades like…

  • 228% on DHI in 25 days…
  • 300% on ELF in 23 days…
  • 205% on NUE in 16 days…
  • 200% on VLO in 14 days…
  • 253% on MRVL in 4 days…
  • 300% on NSC in 28 days…
  • 200% on WDC in 16 days…

And over the next two weeks, Tom’s opening up his members-only live trading room to give everyone an inside look at how easy it is to trade profitably with this AI tech.

Not only will you get five FREE live trading and coaching sessions with Tom and his team to get you up to speed…

You’ll also get:

  • AT LEAST 3 FREE AI-generated trade recommendations with full instructions and live step-by-step training to place your trades
  • A deep dive into Tom’s software so you can see exactly how quickly and easily it scans the market to deliver dozens of potential trade signals
  • An inside look at how Tom handpicks the absolute best trades from his AI system’s results
  • How you can harness the power of to potentially double your money in the next 90 days

There’s nothing you need to do, either. You don’t have to fill out a form… you don’t have to hand over your credit card…

All you have to do is be there for each session – and be ready to trade!

Here’s a look at the upcoming Open House schedule:

Session #1 Monday, October 16, 1-2 p.m. EST

  • Rules-based trading basics
  • What separates Tom’s AI software from other trading systems
  • PLUS: The first 2 lines of code REVEALED

Session #2 Wednesday, October 18, 1-1:30 p.m. EST

  • Session review
  • How Tom’s system filters short-term market noise
  • Backtesting trades with his AI tech

Session #3 Thursday, October 19, 1-1:30 p.m. EST

  • Session review
  • Options strategies: Profit or probability?

Session #4 Monday October 23, 1-2 p.m. EST

  • Putting it all together
  • Live trades
  • And more…

Session #5 Wednesday October 25, 1-30 p.m. EST

  • Special BONUS session

Click here to add Tom’s Open House to your calendar – it’ll be worth it!

As always, to your continued trading success…

Chris Johnson
Quantitative Specialist

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