Day: October 21, 2024

Nvidia has been one of the most hyped and closely followed stocks in recent memory as the fortunes of the broader market increasingly hinge on the AI chip leader.

At one point this year, the stock accounted for more than a third of the S&P 500’s gains, and some investors even held watch parties for Nvidia’s earnings release.

Nvidia’s astronomical run to a $3 trillion company has also been somewhat divisive as many on Wall Street have doubted that the stock can sustain further gains while others see the AI boom fueling more upside.

That’s left investors asking, “should I buy Nvidia stock right now, or sell it?”

Analysts at Bank of America have an answer: In a note on Thursday, they reiterated their buy rating on Nvidia stock and raised their price target to $190 from $165, implying it could soar 38% higher from Friday’s closing price.

At $190 a share, Nvidia’s market cap would also explode to $4.7 trillion from $3.4 trillion today.

In fact, BofA is so bullish on Nvidia stock that analysts called it a “generational opportunity,” estimating a total addressable market of more than $400 billion for AI accelerators.

“AI models (demand) continue to evolve, with the cadence of new LLM model launches now increased to 3-5 times/yr per developer (OpenAI, Google, Meta, etc.), and each new major generation requiring 10-20x compute requirement to train,” analysts said.

Their confidence in Nvidia has been boosted by others in the chip sector like Taiwan Semiconductor and ASML, which both recently signaled strong AI demand. BofA’s meetings with executives at Broadcom and Micron as well as comments from AMD have yielded similar indications.

Meanwhile, Nvidia CEO Jensen Huang also touted huge demand for the company’s next-generation AI chip.

“Blackwell is in full production, Blackwell is as planned, and the demand for Blackwell is insane,” he told CNBC earlier this month. “Everybody wants to have the most, and everybody wants to be first.”

Adding to BofA’s bullish case for Nvidia is its underappreciated enterprise partnerships with the likes of Accenture, ServiceNow, Microsoft, and others as well as its software products that help reinforce Nvidia’s dominance in hardware. They combine to create a deeper overall Nvidia ecosystem for AI.

Plus, Nvidia could generate more than $200 billion in free cash flow over the next two years, rivaling even Apple, BofA estimated.

Earnings reports later this month from tech giants that are developing AI technologies, such as Microsoft, Google, and Amazon, should provide more insight into demand. And Nvidia is due to report Nov. 20.

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While some on Wall Street have expressed skepticism on whether massive investments in AI are translating to the bottom line, the tech sector is locked in a cutthroat race to be first on the scene with the latest advances in AI.

“We continue to see the pace of new model development increase,” BofA said. “LLMs in particular are being developed for both larger size and better reasoning capabilities, which both require greater training intensity.”

This story was originally featured on Fortune.com

(Bloomberg) — Even before global finance chiefs fly into Washington over the next few days, they’ve been urged in advance by the International Monetary Fund to tighten their belts.

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Two weeks ahead of a potentially era-defining US election, and with the world’s recent inflation crisis barely behind it, ministers and central bankers gathering in the nation’s capital face intensifying calls to get their fiscal houses in order while they still can.

The fund, whose annual meetings begin there on Monday, has already pointed to some of the themes it hopes to press home with a barrage of projections and studies on the global economy in coming days.

The IMF’s Fiscal Monitor on Wednesday will feature a warning that public debt levels are set to reach $100 trillion this year, driven by China and the US. Managing Director Kristalina Georgieva, in a speech on Thursday, stressed how that mountain of borrowing is weighing on the world.

“Our forecasts point to an unforgiving combination of low growth and high debt — a difficult future,” she said. “Governments must work to reduce debt and rebuild buffers for the next shock — which will surely come, and maybe sooner than we expect.”

Some finance ministers may get further reminders even before the week is over.

UK Chancellor of the Exchequer Rachel Reeves has already faced an IMF warning of the risk of a market backlash if debt doesn’t stabilize. Tuesday marks the last release of public finance data before her Oct. 30 budget.

The UK tax office is taking a tougher approach to clawing back debts, insolvency specialists say, a bid to squeeze £5 billion ($6.5 billion) in extra revenue.

What Bloomberg Economics Says:

“For all the talk of black holes, the overall effect of Reeves budget will be a policy that’s looser, not tighter, relative to the previous government’s plans.”

—Ana Andrade and Dan Hanson, economists. For full analysis, click here

Meanwhile, Moody’s Ratings has slated Friday for a possible report on France, which faces intense investor scrutiny at present. With its assessment one step higher than major competitors, markets will watch for any cut in the outlook.

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As for the biggest borrowers of all, the glimpse of the IMF’s report already published contains a grim admonishment: your public finances are everyone’s problem.

“Elevated debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can generate significant spillovers in the form of higher borrowing costs and debt-related risks in other economies,” the fund said.

Elsewhere in the coming week, a rate cut in Canada and a hike in Russia are among the possible central bank moves anticipated by economists.

Click here for what happened in the past week, and below is our wrap of what’s coming up in the global economy.

US and Canada

Economists see a pair of home sales reports showing that declining mortgage rates are merely helping to stabilize the US residential real estate market. On Wednesday, the National Association of Realtors will issue data on contract closings for previously owned homes, followed a day later by government figures on sales of new homes.

Economists project modest increases in September sales of both existing and new homes. Resales remain hamstrung by limited inventory that’s keeping asking prices elevated and hurting affordability. While purchases of previously owned properties remain near the weakest pace since 2010, builders have capitalized: New-home sales have gradually picked up over the past two years with the help of incentives.

Other US data in the coming week include September durable goods orders, plus capital goods shipments that will help economists fine-tune their estimates of third-quarter economic growth. The Federal Reserve also issues its Beige Book, an anecdotal readout of the economy.

Regional Fed officials speaking in the coming week include Jeffrey Schmid, Mary Daly and Lorie Logan.

Meanwhile, the Bank of Canada is increasingly expected to cut rates by 50 basis points after inflation cooled to 1.6% in September and some measures of the labor market remain weak.

Europe, Middle East, Africa

As with other regions, attention will largely be focused on Washington; more than a dozen appearances of European Central Bank’s Governing Council members are scheduled stateside.

That includes President Christine Lagarde, who’ll be interviewed by Bloomberg Television’s Francine Lacqua in Washington on Tuesday.

Similarly, Bank of England Governor Andrew Bailey will speak in New York on Tuesday, while Swiss National Bank President Martin Schlegel is scheduled to appear on Friday.

Among euro-area economic reports, consumer confidence on Wednesday, purchasing manager indexes the following day, and the ECB’s inflation expectations survey on Friday may be the highlights. Similarly, Germany’s Ifo Institute will release its closely watched business confidence gauge at the end of the week.

Aside from the possible rating assessment on France, S&P may also release reports on Belgium and Finland on Friday.

Turning east, two central bank decisions are likely to draw attention, starting on Tuesday with Hungary, which may keep borrowing costs unchanged.

The Bank of Russia has signaled that continued inflationary pressures could lead to another rate hike on Friday. They lifted it 100 basis points to 19% in September, and a similar move would return the rate to the 20% level imposed in an emergency increase after President Vladimir Putin began the February 2022 full-scale invasion of Ukraine.

Finally, data on Wednesday from South Africa is expected to show inflation slowed to 3.8% in September, boosting the chances of another rate cut next month. The central bank said it now forecasts consumer-price growth to stay in the bottom half of its 3% to 6% target band over the next three quarters.

Asia

Lenders in China, with a nudge from the People’s Bank of China, are expected to join the campaign to revive business activity by trimming their loan prime rates on Monday. The 1-year and 5-year rates are seen sliding by 20 basis points to 3.15% and 3.65%, respectively.

At the end of the week, data will show if the nation’s industrial profits bounced back in September after slumping more than 17% in August. The most recent numbers showed the economy expanding at the lowest pace in six quarters during that three-month period.

Elsewhere, the region gets a cluster of PMIs on Thursday, including from Japan, Australia and India.

Singapore is forecast to report Wednesday that consumer inflation slowed in September, with price growth updates for that month also due from Hong Kong and Malaysia.

On Friday, Japan will report Tokyo CPI for October, a key indicator that will capture corporate price changes at the start of the fiscal second half.

South Korea will release third-quarter growth figures on Wednesday that may show the economy’s momentum has slowed marginally.

During the week, South Korea releases early trade statistics for October, with Taiwan and New Zealand releasing trade numbers for September.

Among the region’s central banks, many leading officials will attend the IMF meetings in Washington. Reserve Bank of Australia Deputy Governor Andrew Hauser holds a fireside chat on Monday, and three days later the bank publishes its annual report.

Reserve Bank of New Zealand chief Adrian Orr speaks on policy on the sidelines of the IMF confab, and Uzbekistan’s central bank will decide Thursday whether to pause for a second meeting following its July rate cut.

Latin America

Brazil watchers will be keen to see the weekly forecasts in the central bank’s so-called Focus survey due on Monday.

Expectations for inflation, borrowing costs and debt metrics have lately taken a decidedly gloomy turn given doubts about the government’s fiscal discipline.

In Mexico, GDP proxy data should be consistent with the loss of momentum that has many economists marking down their third-quarter growth forecasts. The economy is expected to slow for a third year in 2024.

GDP proxy data for Argentina will probably show South America’s second-biggest economy sputtering and still in the grip of a recession that’s likely to extend into 2025.

Paraguay’s central bank holds its rate setting meeting; policymakers have kept borrowing costs at 6% for the past six months with inflation running slightly above the 4% target.

On the prices front, neither investors nor policymakers will be cheered by mid-month inflation reports from Brazil and Mexico given the early consensus for higher headline readings.

The data here will likely do nothing to dent the prospects of Brazil’s central bank tightening policy again on Nov. 6, while at the same time giving Banxico pause about a third straight cut at its Nov. 14 gathering.

–With assistance from Laura Dhillon Kane, Brian Fowler, Robert Jameson, Monique Vanek, Vince Golle, Brendan Scott and William Horobin.

(Updates with UK tax office in eighth paragraph)

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Mark Cuban’s bold claim that Warren Buffett’s famous buy-and-hold strategy is a “crock” has reignited debates within the investing community.

Cuban, known for his unapologetic views and a net worth surpassing $5 billion, isn’t shy about challenging established investment philosophies. His thoughts on diversification, particularly, stir the pot among traditional investors, with a growing number backing his aggressive approach.

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According to Buffett, “diversification is a protection against ignorance,” a guiding principle that’s long been at the heart of his investment strategy. Buffett’s approach leans on the idea that spreading your money across various assets can shield against market downturns.

For many retail investors, index funds are the go-to for diversification. These funds mimic broad market indexes to provide a stable, if not flashy, return over time.

On the other hand, Cuban cuts through the noise with a more concentrated strategy. He’s famously said that “diversification is for idiots” and that the buy-and-hold strategy embraced by Buffett devotees is essentially worthless.

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Cuban’s view resonates with some investors who are laser-focused on beating the market rather than merely matching it. According to Morningstar research, professional money managers who outperform benchmarks often make big, bold bets – not by playing it safe with a diverse portfolio.

For investors grappling with which billionaire to follow, a look at the numbers might help. Cambridge Associates’ 2017 study supports diversification: “Diversified portfolios still prevail over the long term,” the report says, suggesting that a diverse strategy might cushion portfolios against severe market drops and provide more consistent returns over decades. This echoes Buffett’s success with slow and steady wealth-building.

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But not everyone is convinced. Cuban’s strategy, which focuses more on tech and innovative industries, has paid off handsomely in a world increasingly reliant on technology. He believes focusing on a few high-conviction bets will generate better returns, a sentiment shared by other billionaire investors.

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Real estate often emerges as a contender for those seeking alternatives to the traditional stock market. High home prices and mortgage rates have made owning property trickier, but the allure of steady rental income hasn’t faded.

See Also: ‘Beating the market through ethical real estate investing’ — this platform aims to give tenants equity in the homes they live in while scoring 17.38% average annual returns for investors – here’s how to join with just $100

Meanwhile, data from Nareit shows that commercial real estate offers steady returns and lower volatility than stocks. The numbers speak volumes – commercial real estate has a lower correlation to the S&P 500, making it a useful hedge for many investors.

And if real estate doesn’t entice, fine art might. According to data from the Citi Global Art Market chart and as cited by CNBC, contemporary art outperformed the S&P 500 over the last two decades, with annual returns of 11.5% compared to the market’s 9.6%. Cuban’s strategy might inspire you to look at alternatives like blue-chip art, which offers unique opportunities beyond stocks.

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This article Mark Cuban Calls Warren Buffett’s Buy-And-Hold Strategy A ‘Crock’ – Which Billionaire’s Investment Style Aligns With Your Goals? originally appeared on Benzinga.com

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

SoFi Technologies (NASDAQ: SOFI) is on a roll. The stock recently soared to $10 per share, its highest price since early 2022. It’s progress, but the stock is still down about 60% from its all-time high, set during the market bubble in 2021. SoFi is a digital bank, but it’s not exactly a banking stock. (Well, it’s not a traditional bank stock.)

So, just what is SoFi? It could be an industry disruptor with traditional banking features and the added upside of a technology company.

Here are five reasons investors should consider buying SoFi Technologies and tucking it away for the foreseeable future.

1. It’s wildly popular among consumers

On the surface, SoFi Technologies is a digital bank. It offers banking services, loans, and financial products through its website and smartphone app. Unlike many longstanding banks, SoFi doesn’t have any physical branches. It’s a business model born in the digital age. More importantly, SoFi has become quite popular. The company’s customer base has grown from 1.4 million at the start of 2020 to nearly 8.8 million today.

SoFi’s customer count grew 41% year over year in the second quarter, so this trend still has plenty of momentum. SoFi has become especially popular with young, high-earning adults. This is one of the most valuable customer segments in the financial sector, because they will drive the economy over the coming decades.

2. More than a bank

Behind the curtain, SoFi has financial technology in its DNA. In 2020, it acquired Galileo, a fintech company that provides payment processing, card issuing, and embedded finance services to over 100 companies, including H&R Block, Toast, MoneyLion, and others, across 16 countries. Collectively, Galileo’s customers add up to 158 million accounts.

SoFi’s technology platform segment (Galileo) grew its contribution profit by 24% last year, representing about 10% of the company’s total in 2023. Additionally, Galileo accounts have quintupled since the first quarter of 2020. Over time, Galileo could become a more significant contributor to SoFi’s business and expose investors to broader growth across the fintech industry.

3. Student loan upside

SoFi started in the student loan business and built a reputation in refinancing. In 2019, SoFi originated $6.7 billion in loans. However, a federal student loan freeze for most of the past four years and higher interest rates since 2022 have effectively cratered demand for refinancing. SoFi’s student loan originations were just $2.6 billion in 2023, despite it adding millions of customers since 2019.

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It looks like the worst is past. The federal freeze is virtually over, and interest rates have seemingly peaked. Meanwhile, analysts estimate that the private student loan market could grow by 10% annually through the early 2030s. SoFi’s student loan business could uncoil like a spring and boost growth over the coming years.

4. SoFi could lean into fee-based revenue

SoFi may not operate quite like a traditional bank over the long term. Traditional banks hold loans on their balance sheets and collect the interest. The risk of default affects how the market values bank stocks compared to most other businesses. Galileo already represents a non-lending component of SoFi’s business, but things got more interesting recently.

Just days ago, SoFi announced an agreement to expand its personal lending business with a $2 billion funding agreement with Fortress Investment Group. Simply put, SoFi will underwrite personal loans but then offload them. SoFi will miss out on the interest income, but it will reduce its balance sheet risk. CEO Anthony Noto commented in the press release, noting an intention to grow SoFi’s fee-based revenue. Holding fewer loans on its books could affect how the market values SoFi stock.

5. Earnings growth is set for lift-off

I often use book value to evaluate bank stocks, but Galileo and a potentially less lending-dependent business model make earnings a viable way to value SoFi stock. SoFi reported a GAAP profit for the third consecutive quarter in Q2 2024. The company is right at that sweet spot where operating leverage (when revenue grows faster than expenses) causes high-speed earnings growth.

Analysts estimate that SoFi will grow earnings by an average of 51% annually for the next three to five years. Given SoFi’s popularity and growth opportunities, I wouldn’t be surprised to see the company enjoy strong earnings growth for the foreseeable future. The stock looks like a candidate to perform well for investors as those earnings compound for years to come.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Toast. The Motley Fool has a disclosure policy.

1 Digital Banking Stock Down 61% to Buy and Hold Forever was originally published by The Motley Fool