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RIIQ Newsletter

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A Defining Month for Investors: December 2024

Must-Know Market Movers Right Now

Intro

December 2024 has proven to be a defining month for investors as the AI revolution reshapes industries and dominates market discussions.

Whether it’s Nvidia facing regulatory headwinds in China, Broadcom breaking into the trillion-dollar league, Marvell leading the charge in custom silicon innovation, or Blue Whale strategically overhauling its tech-heavy portfolio, these stories represent the most critical opportunities and challenges of today’s market.

Let’s delve into these pivotal developments in greater detail, uncovering their significance for both seasoned and new investors.

Nvidia: The $3.5 Trillion Titan Under Pressure

China's anti-monopoly probe into Nvidia isn’t just regulatory posturing—it’s a high-stakes geopolitical move that highlights the vulnerability of global tech giants.

Nvidia’s meteoric rise in 2024 is the stuff of Wall Street legend. Its stock skyrocketed by 180% this year, briefly making it the most valuable company on the planet with a market cap of $3.5 trillion.

As the unrivaled leader in AI hardware, Nvidia’s GPUs are the go-to tools for building and deploying advanced machine learning models, cementing its dominance in sectors like healthcare, gaming, and autonomous vehicles.

Yet, this December, Nvidia’s remarkable ascent hit a bump: China has launched an anti-monopoly investigation targeting the company’s $6.9 billion acquisition of Mellanox Technologies back in 2019. The probe alleges unfair bundling practices and non-compliance with conditions initially set by Chinese regulators, such as maintaining compatibility with chips manufactured by domestic firms​.

China accounts for approximately 16% of Nvidia’s revenue, making this probe far from trivial. It signals an escalation in the tech cold war between the U.S. and China, with Beijing aiming to reduce its reliance on American chipmakers while asserting its regulatory authority. Analysts suggest that this move could be a bargaining chip as the geopolitical stakes between the two superpowers continue to rise​.

For investors, this situation is a two-sided coin. On the one hand, the investigation introduces near-term uncertainty, with potential fines or operational restrictions looming. On the other hand, Nvidia’s long-term growth story remains compelling.

Its latest earnings report revealed $35 billion in quarterly revenue—a staggering 94% year-over-year increase—driven by unrelenting global demand for its GPUs. The AI wave shows no signs of slowing, and Nvidia is riding its crest with unparalleled dominance.

The takeaway? Nvidia remains a foundational play in the AI economy, but geopolitical risks are a reminder to diversify and weigh the complexities of global supply chains.

Blue Whale’s Big Bet: Backing Nvidia, Shedding the Rest

Blue Whale Growth Fund’s radical portfolio reshuffle shows that even Big Tech’s darlings aren’t immune to scrutiny when AI spending spirals out of control.

Stephen Yiu, the bold manager of the Blue Whale Growth Fund, has sent shockwaves through the investment community this month. Historically a champion of the Magnificent Seven—the tech giants that include Microsoft, Meta, and Apple—Yiu has dramatically cut exposure to six of these companies while doubling down on Nvidia, now the fund’s largest holding at nearly 10% of the portfolio​.

Why the shift? Yiu has grown increasingly concerned about runaway AI infrastructure spending among these giants, which he believes could drag down their returns on invested capital. For instance, Microsoft’s aggressive investments in AI tools and data centers have pushed its share of the fund from 8% in January to just 2% now.

Similarly, Meta’s increased AI expenditure has led Yiu to cut its weighting from 5% to 3%​. But Nvidia is the exception. Yiu argues that the company’s GPUs offer a clear path to monetization, with AI demand skyrocketing across industries. Unlike its peers, Nvidia has successfully converted its heavy AI investments into tangible profits, a feat that has earned it the fund’s unshakable confidence.

The fund’s performance supports this strategy: Blue Whale has returned 24% year-to-date (in December 2024), significantly outpacing its peers’ 15% average. Yiu’s decision to back Nvidia while stepping away from other Big Tech names underscores a key principle for investors: even in transformative sectors like AI, focus on companies with proven execution and a clear ROI.

Broadcom’s Skyrocketing Success: 95% Growth and Counting

Broadcom has quietly built itself into the backbone of the AI revolution, becoming a $1 trillion market heavyweight with no signs of slowing down.

Broadcom’s journey to becoming a trillion-dollar company has been as strategic as it has been spectacular. The chipmaker, long known for its prowess in semiconductors, is now firmly entrenched as a cornerstone of the AI ecosystem.

This year, Broadcom’s stock surged 95%, fueled by booming demand for its AI chips, which are critical to powering data centers and cloud infrastructure​. The company’s Q4 numbers are jaw-dropping. Sales rose 51% year-over-year, while earnings jumped 28%. CEO Hock Tan recently outlined a bold vision for the future, projecting an addressable market of up to $90 billion by 2027.

Broadcom’s focus on foundational AI hardware—chips that enable neural networks and other machine learning tasks—positions it as an indispensable player in the ongoing AI boom​.

What sets Broadcom apart is its focus on execution. The company’s strong financials and disciplined approach to scaling have earned it investor confidence, evidenced by its double-bottom breakout base and new highs in its relative strength line. Unlike consumer-facing tech giants, Broadcom thrives as the “picks and shovels” provider of the AI gold rush, quietly powering transformative innovations behind the scenes.

For investors, Broadcom offers a compelling mix of growth and stability. Its dominance in AI infrastructure provides a critical foundation for applications across industries, from healthcare to finance. As the AI economy continues to expand, Broadcom is well-positioned to capitalize on the wave of adoption.

Marvell: Custom Silicon, Big Gains, Bigger Future

Marvell Technology isn’t just participating in the AI revolution—it’s shaping it, thanks to its cutting-edge custom silicon solutions tailored to meet tomorrow’s demands.

This tech powerhouse has firmly established itself as a standout in the semiconductor sector, largely due to its sharp focus on AI.

Marvell’s Q3 performance highlights its robust trajectory: a staggering 98% year-over-year (YoY) growth in data center revenue, with AI-related products now making up a hefty 72% of total revenue.

This impressive transformation is no accident—Marvell has zeroed in on creating custom silicon, particularly ASICs (application-specific integrated circuits) that cater to the specialized needs of cloud providers and enterprise clients. These chips deliver unprecedented efficiency in AI data centers, solidifying Marvell as a key partner for businesses investing heavily in AI infrastructure.

At the helm of this success is CEO Matt Murphy, who has expressed unshakable confidence in the company’s direction. His forecast of 26% revenue growth for Q4 underscores his belief that Marvell is entering a transformative period—a “new era” as he calls it.

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With custom solutions already in mass production, the company is well-poised to maintain its upward momentum through 2025 and beyond. However, some analysts are striking a cautious note, pointing out that Marvell’s stock appears overvalued by about 25% relative to its fair value.

For savvy investors, Marvell represents the epitome of the power of specialization in a crowded tech landscape. By focusing on tailored, high-performance solutions, Marvell has carved out a lucrative niche, distinguishing itself in an industry where many competitors rely on scale alone. For those betting on the AI boom, this company could very well be the next big thing.

Closing Thoughts: Where Do You Stand in the AI Revolution?

The AI revolution is rewriting the rules of investing, and December’s market movers highlight this vividly. Nvidia, despite geopolitical challenges, remains a cornerstone of AI innovation, proving that dominance in cutting-edge technology can weather external pressures. Blue Whale’s pivot shows that even tech giants face headwinds when ROI falters, while Broadcom’s rise underscores the vital role of infrastructure providers in transformative industries. Marvell, with its focus on custom solutions, exemplifies the power of adaptability and specialization in carving out lucrative niches.

For investors, the lesson is clear: success in the AI economy requires discernment, agility, and a focus on fundamentals. This era of technological transformation is not just about identifying trends but about picking the players who can execute on them with precision and vision. Whether you’re captivated by Nvidia’s resilience, Broadcom’s infrastructure dominance, or Marvell’s tailored expertise, the opportunities are immense for those willing to dig deeper and take calculated risks.

As we step into 2025, the AI revolution is far from reaching its peak. The rapid pace of innovation will likely unveil new market leaders, disrupt established norms, and generate massive wealth for those who position themselves strategically.

The question is not whether AI will reshape industries—but whether you’ll seize the moment to shape your portfolio for the future. The game is on. Are you ready to capitalize on it?

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Information provided on this site is based on my own personal experience, research, and analysis, and it is not to be construed as professional advice. Please conduct your own research before making any investment decisions.  I am not a professional financial advisor, stockbroker, or planner, nor am I a CPA or a CFP.

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