AI Insights: Does Every Portfolio Need a Slice of Nvidia?

Nvidia just might be the most obvious stock pick in the world.

Do you really need cutting-edge AI to recommend buying Nvidia? Probably not — but here we are.

Last week’s article focused on Progyny, a rising women’s healthcare company. This week, the topic shifted to Nvidia, arguably the biggest player in AI.

As a reminder, we ask ChatGPT for a stock pick every week, as part of our ongoing AI Insights feature.

Nvidia marks the fourth time that ChatGPT has chosen an AI-focused company for its stock recommendation (it also liked NetApp, Seagate and Micron). Only twice has the chatbot deviated from AI recommendations (the aforementioned Progyny and Comcast).

It’s hard to fault the choice too much, as AI seems to be driving the entire market right now; however, we’re approaching a portfolio with some serious vulnerabilities to a downturn in the AI space.

What’s left to be said about Nvidia? Well, actually a few things. Let’s get started.

ChatGPT Stock Pick of the Week: Nvidia (NVDA)

It turns out that ChatGPT had a very particular reason that it chose to add Nvidia to the portfolio. Here’s exactly how it responded to our usual prompt:

Nvidia (NVDA) is the top pick today, with fresh quarterly results that beat Wall Street estimates and sent shares higher as management highlighted record revenue and strong AI data center demand momentum.

Nvidia (NVDA) at a Glance

Nvidia over the last 12 months. Data from TradingView.com.

Our Take

As you might expect we’ve done a ton of reporting on Nvidia over the last 12 months. It’s hard to ignore the biggest company in the world. Back in August, senior news writer Dave Kovaleski wrote an article titled Up 85% Since April, Can Nvidia Stock Keep Rising? that investigated the long-term potential of the stock.

This passage from the article proved to be especially astute:

Nvidia has seen strong growth in its new Blackwell line of AI chips for data centers, which it began rolling out late last year. Investors should watch for AI data center growth, where Nvidia is the dominant player with more than 90% market share.

As it turns out, Blackwell and data centers were a key element of an extremely positive quarterly earnings report yesterday. Nvidia CEO Jensen Huang referred to the demand for the Blackwell AI chips as “Off the charts”.

Of course, that same article was quick to point out that Nvidia’s price-to-earnings ratio was extremely high at 57. It’s calmed down slightly since then but still stands at a lofty 53, which tells you a little about investors’ expectations for the stock.

Now let’s see what everyone else is saying about Nvidia.

What Other Experts Are Saying About Nvidia

Nvidia just might be the most discussed stock in the world right now so you certainly have your share of takes available.

The argument on both sides is fairly straightforward. The proponents cite the enormous potential of AI and Nvidia’s integral position supplying chips and infrastructure. Meanwhile, the detractors point to an inflated price-to-earnings ratio and the risk of an AI bubble.

Analysts at Goldman Sachs and JP Morgan recently raised their price targets to $250. Analysts at both firms pointed to the incredibly strong demand for Nvidia’s chips (particularly Blackwell).

There are plenty of investors who don’t see the value at current prices, however. Peter Thiel’s hedge fund recently dumped its portfolio of Nvidia (worth around $100 million) and last month Softbank sold its massive $5.8 billion stack. Most of the concerns relate to an AI bubble.

Regardless, the consensus is that Nvidia is a strong buy with a lofty average price target of $255.

How Did Last Week’s Pick Perform?

ChatGPT seems to have hit on Progyny, at least in the early stages. Chart from TradingView.com. 

Last week ChatGPT switched things up by suggesting women’s healthcare company Progyny. The early returns are very solid with the company getting a sizable spike over the last week. The prevailing wisdom is that investors are responding to Progyny’s strong earnings report at the beginning of the month and its $200m stock buyback program.

Interestingly, the AI chatbot appears to favor stocks that are near earnings reports. It’s picked several stocks (including today’s pick Nvidia) that were on the cusp of earnings reports.

As far as the performance of the overall AI insights portfolio is concerned, it lost a significant amount of value over the last week thanks to a volatile market.

Micron Technology and Progyny are the biggest winners in the portfolio while NetApp remains the dog thus far.

It’s worth noting that the AI Insights has held its value better than the control portfolio (comprising 100% VTI), which is interesting.

Here’s a look at where the AI Insights portfolio stands after five weeks:

AI Insights Portfolio

• Total invested: $500
• Current Market Value: $502.39
• Gains: 0.47%

And here’s how the AI Insights compares to our control portfolio, which is composed entirely of the Vanguard Total Stock Market Index Fund with purchases made over the same period. Of note, this is the first time VTI portfolio has dipped into the negative.

Standard Portfolio (100% VTI)

• Total invested: $500
• Current Market Value: $489.22
• Gains: -2.15%

It’s been somewhat of a rough week for equities so it’s interesting to see the AI Insights portfolio hold up slightly better. We’ll keep tracking this one as time goes on.

Methodology

Every week, we ask ChatGPT for a simple stock recommendation after the market closes on Wednesday.

We created some parameters for the recommendation, which you can read more about at the bottom of the first AI Insights article.

Disclaimer: Neither the large language models or ValueWalk suggest actually using this as an investment strategy. This article is for educational purposes only.