In 1999, when people wanted to find stocks to buy that could benefit from the potential of the Internet, many put their money into almost any stock that mentioned the Internet in a press release.
At the time, many commentators spoke of a bubble. There is no way that amazon It's worth more than $5 a share, they said: it's destined to fall.
They were right: a couple of years later, amazon shares were selling for pennies.
Let's fast forward a couple of decadesAnd, well… there's no need to rub it in my face if, like me, you didn't buy or hold amazon stock.
<h2 class="wp-block-heading" id="h-ai-is-history-repeating-itself”>ai: Is history repeating itself?
A couple of decades may seem like a long time to wait.
However, as a long-term investor, I recognize that this is where the big money is to be made. As the late Charlie Munger said: “The big money is not in buying and selling, but in waiting.“.
There is a lot of talk right now about whether ai-based investing is a stock market bubble. Can a stock like this Nvidia (NASDAQ: NVDA) In fact Is the stock's share price gain of more than 2,700% over the past five years worth it?
Maybe, like in 1999, looking at an individual stock and making fun of its price is not the best way to get rich.
What if, while many companies fall by the wayside, ai follows the same path as the Internet: it goes from an idea to a hugely profitable area of business, with some companies making huge profits from it?
Choosing the winners
So back to the question of which stocks to buy… and when?
It's easy to get caught up in the fog of excitement when a new investment theme comes up, but investing is investing. I think some basic principles are important.
Long term, Nvidia is exactly the kind of ai stock I'd happily own.
Why? In a gold rush, the old saying goes, the one who makes money is the one who sells shovels. For Nvidia to succeed, one version of ai doesn’t need to prove itself over another, as is the case for some end users of its products. On the contrary, as companies invest in ai capabilities, companies like Nvidia that provide the backbone of the technology should see strong sales.
That's true of a number of chipmakers, but I like Nvidia more than most because it has already proven its business acumen. In its most recent quarter, the company's revenue was $30 billion, more than I expected. double The same quarter last year. Net profit was $16.6 billion.
Of course, Nvidia faces challenges, from an uncertain ai rollout beyond initial enthusiasm to sophisticated rivals trying to eat its breakfast.
On top of that, its current valuation and market cap of $2.9 trillion seem exaggerated to me (just like amazon's in 1999).
But if the valuation becomes more reasonable, Nvidia would top my list of stocks to buy to try to help my portfolio benefit from the long-term prospects of ai.
My approach is to select proven, profitable companies with scale and competitive advantages and then wait for an attractive stock price to buy.
