The investment manager has pegged Nvidia to lead the charge in a tech rally in 2024, reminiscent of Apple’s success story, as artificial intelligence looks to experience its own “iPhone moment”.
Semiconductor designer Nvidia could go on to overtake Apple to become the world’s largest company, according to Munro Partners.
The last year saw high-performance computing companies drive gains in the US stock market, prompted by the artificial intelligence (AI) revolution. Among the frontrunners was Nvidia, which has seen its stock price surge some 235 per cent as at mid-December 2023, with earnings up nearly 400 per cent.
Other tech companies have also witnessed considerable earnings growth driving up their stock prices, including Alphabet which was up almost 50 per cent, Microsoft up 56 per cent, and Amazon up 73 per cent.
“The big moral of the story for 2023 is that earnings growth drove stock prices, and as soon as interest rates stopped going up, stocks went back to following their earnings,” said Nick Griffin, chief investment officer, Munro Partners.
“We see no reason why that’s not going to continue in 2024. We think this is the iPhone moment for AI."
“Apple became the biggest company in the world, helped by the launch of the iPhone. Now, if we see a 10-times growth in demand for semiconductors, we think Nvidia will potentially one day become the biggest company in the world.”
Munro, which manages $4 billion in assets under management, highlighted that the semiconductor industry looks to generate around a trillion US dollars by 2030, compared to next to nothing sales almost five decades ago.
Nvidia remains the largest holding in the Munro Global Growth Fund (6.88 per cent) as at 31 December 2023. It delivered 16 per cent in the last year and 2.2 per cent for the month of December.
According to Mr Griffin, in an increasingly digital world, the demand for computer chips will only continue to grow.
“Innumerable generative AI models are being launched following the introduction of ChatGPT last year. Every time an AI application gets used, it increases revenue for cloud providers and semiconductor companies led by Nvidia,” he said.
“Businesses will need all of their data to run on the cloud, and then the cloud providers are going to increase capital spending to support these AI products, and a large chunk of that capital spending is going to end up with Nvidia, which handles the AI processing.”
He not only pinpointed Nvidia but also the whole semiconductor supply chain as winners from the growing use of AI. These included Taiwan’s Taiwan Semiconductor Manufacturing (TSMC), the world’s largest foundry or manufacturer of computer chips, and Europe’s largest technology company ASML, which makes the machines that produce some of the world’s most advanced computer chips.
Moreover, software companies like Microsoft are on track to benefit, Mr Griffin said.
“We think software companies are also the biggest winners here. Microsoft is selling their Copilot product at roughly an additional US$30 per user, which is effectively a huge revenue opportunity for this company,” he observed.
Additional sectors on Munro’s radar in 2024 include energy efficiency and sustainability companies, such as companies producing nuclear energy.
Its Munro Climate Change Leaders Fund holds exposure to nuclear energy through the stock Constellation Energy, which remains a top-performing stock for its climate area of interest this year. The fund delivered 4.1 per cent for one month and 15.1 per cent for the year as at 31 December 2023.
Mr Griffin elaborated: “Nuclear energy is slowly coming back into vogue. We saw this recently at the COP28 conference in Dubai, with 22 world leaders committed to triple nuclear capacity globally by 2050 compared with 2020 levels. Nuclear energy is the cleanest way to solve the carbon emissions problem.”
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