Nvidia (NVDA) is preparing for a 10-for-1 stock split after the market closes. Winthrop Capital Chief Investment Officer Adam Coons Joins Wealth! to discuss whether this offers a new buying opportunity for the chip giant as the AI race heats up.
Coons explains that while the split allows for more investors in the stock, “the downside to this is that the big stock prices are often positioned for institutional investors who tend to be more long term, and their decision making is long term. they are not as visceral in their reactions to perhaps an earnings release or some other news event that would cause them to sell an entire position relative to retail investors, who would buy and might have a more emotional attachment to the stock.” He notes that the Stock splits will open up an opportunity for investors who have been on the sidelines as the price becomes more attractive.
He adds that “the whole AI pie is growing” as the technology infiltrates every corner of the market. Coons points to the cybersecurity sector and companies like CrowdStrike (CRWD) as an area getting a boost from technology. Additionally, he explains that Qualcomm (QCOM) is well positioned as AI integrates into laptops.
For more expert insights and the latest market action, click here to watch this full episode of Wealth!
This post was written by Melanie Riehl
Video transcript
Let’s change the subject here and talk.
A little NVIDIA.
NVIDIA is set to complete its highly anticipated 10-for-one stock split after the market closes today.
The strategic move aimed at making ownership of shares in the chip giant more accessible, but with greater accessibility to investing in NVIDIA, what investors should consider in the next chapter of AI darling Adam Moons Winthrop Capital Chief Investment Officer if joins us now to discuss Adam Moons Winthrop Capital Chief Investment Officer joins us now to discuss Adam .
It’s great to have you here.
I mean, this is the big day after the market closes and on Monday we will see prices reflect the 10 for a split.
This isn’t the first time we’ve seen a split from NVIDIA nor from a company A mag seven last year.
So all of those things considered what makes this one different.
Yes, first, thank you for, thank you for having me.
There will probably be a handful of people who opened their accounts on Monday and didn’t see this coming and I wonder what happened.
But for anyone who’s been paying attention, I think, you know, one of the big things that you see generally with a stock split and you would expect with a, with a stock that has reached 33 trillion market cap is this, it allows that more investors enter the shares.
And that might seem like a good thing.
And overall, it’s great to open up, you know, the ability for more people to invest in a great company like NVIDIA.
The downside of this is that share prices are high, generally our position for institutional investors who tend to be more long term and their decision making is long term.
And so they’re not as visceral in their reactions to maybe an earnings release or some other news event that would make them, you know, sell an entire position relative to retail investors, uh, who would buy and, and they might have a more emotional attachment to shares, both when buying and selling.
So that can lead to greater volatility as you start to dilute the institutional buyers by introducing more retail investors who, like I said, can be a little bit quicker and more emotional with their buying and selling decisions. poster child for many of the AI-powered gains we’ve seen over the past year and change.
And a lot of people are trying to figure it out too.
It makes sense if they are not invested now to potentially add this stock split to their portfolio, as it appears to be more affordable, at least price-wise.
Right.
Yeah, I mean, obviously the whole AI trade has gained a lot of traction and if you’ve been outside of that, it’s probably hard to watch these stocks that have doubled and tripled and quadrupled.
So, it will probably open up investors who have been left on the sidelines.
Now, keep in mind that any investor that has, you know, a stake in the S and P 500 through an ETF or something like that, they still own part of it.
So I hope investors keep that in mind when they’re trying to decide whether they want to, you know, buy these individual stocks.
But I think, you know, one thing to note is that this is a stock that has already priced in a lot of that upside.
And so what we’re trying to do is find other areas to play machine learning artificial intelligence in a way that can complement what NVIDIA is providing with its chipset because, you know, right now that’s a gimmick.
They are GP nodes that help with the whole, you know AI processing.
But there are many other companies that are using machine learning to improve their current business model.
And that’s where we’re starting to focus as we start, you know, selling our positions in NVIDIA because we’ve cut, as we’ve seen the stock go higher and higher, we’re prudent in taking, taking gains.
And now we have almost halved our position in NVIDIA.
That’s interesting, Adam.
And, oh, and now, as you look at what we might sum up as a broadening of the field of AI, some of the other companies that might be beneficiaries or, as we’ve heard from some of our previous guests, looking at things like public services that will have that powering the data centers, all the things that are interconnected where that demand is also really driving the broader market.
What are some of the pieces you are considering?
Yes.
So it’s important to understand that obviously the entire AII is growing and it’s not clear how big it is now and how big it can get.
Um, but we know it’s going to be a big market, I think no matter what happens, there are a lot of unknowns in A I.
But what we know is that it is real and it will be a very, very big market.
So we’re looking for a way to play, as you said, one way is obviously, you know, introducing greater complexity into technology and how we use technology that also increases the risk of cyberattacks.
And so I think if you’re looking for themes within AI, you can’t ignore cybersecurity as a whole and there are a few different ways to play with that.
But now I’m really on a mob strike.
They are one of the leaders in the industry and use machine learning to have a more advanced version of cybersecurity.
Uh The evaluation is a little rich, so be careful.
Uh But I still like the stock.
I like the trajectory.
I like business momentum, not just stock momentum, because they have a broad mode.
Its acquisition cost for customers is the lowest on the market.
So that’s one of the reasons I like crowdstrike.
Additionally, you’ve seen Qualcomm launch some new chipsets that complement artificial intelligence and that’s in laptops and other devices that can help.
You just said their energy consumption.
And so I think it’s a great piece.
It’s looking at all the different ways you can split this and you can find winners not just in one stock because that’s really the way to be careful here is to diversify away from concentration.
We know that AI will continue to grow, but staying within a company can create some difficulties.
So spreading these bets and let’s say the Qualcomm crowd attacks and we also like the alphabet.
This is yet another van and obviously a big player in the AI space.
Yes, Adam, we only have about 30 seconds here.
Should investors be worried about the short bets that are booming right now?
About $34 billion according to S3 partners?
I mean, do you think about how that compares to the $19 billion against Apple and the $18 billion against Tesla?
You can essentially combine these two and still be close to the short positions that have emerged with NVIDIA.
What do you think?
Absolutely.
And it’s like a stock split is something like that that can increase volatility.
You can really increase the upside.
If there is a little pressure, you could see a big pop in the stock, but it also increases the risk of a downside.
So I think it’s just something to be careful about in terms of sizing your position.
Remember this is a high volatility stock.
It has been going up and up and volatility has been the upside, but the same thing can happen on the downside.
So make sure you protect yourself by managing your position sizing Adam Koons, who is the chief investment officer at Winthrop Capital, Adam.
Great to see you.
Thank you so much for joining the show with us tonight.
Certainly.
