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Ladies and gentlemen, it's no surprise, we all know, that the Nasdaq index has fallen approximately 25 percent so far this year. Many stocks, especially semiconductors, have experienced even larger sell-offs throughout the year. In addition, concerns about a possible prolonged recession and other macroeconomic pressures that will affect the market in general, manufacturing problems, and geopolitical risk factors with China and Taiwan have also led investors to abandon these stocks.
In this video, we're going to talk about Nvidia and Intel, which in my opinion are the leading chip companies today. We also have other examples, such as, etc., etc., but these two have experienced significant sell-offs, and their stocks are trading very low, down 41 and 53 percent this year respectively.
So, which of these two major players is a better investment right now? Should we talk about Nvidia or Intel? Indeed, because right now Intel is at $29. Well, let's start with... Envy, if you agree, and we 'll put it here, and well, we have to say, envy is that it has a truly proven capacity to innovate, and the truth is, as we were talking about years ago, one of the factors I rated very highly when considering investing in a technology company.
If it's a technology company but you don't have the capacity to innovate, or it 's not proven that you can innovate, well, you do n't really interest me, right? That obviously means more than just developing an excellent product or service; it means just having a trick and taking over the market that way, you could say.
Well, what envy! It has demonstrated its innovative capabilities by repeatedly improving its graphics processing units, or GPUs, which its son Jason Juan created years ago. Those highly sought-after computer chips power practically all gaming devices, cloud servers, cockpit displays in cars and airplanes.
It's almost as necessary as the air we breathe today for not only our technology but also our economy, if I'm not mistaken. Obviously, the solid customer demand has boosted Nvidia's revenue. In 2016, it was generating some $4.1 billion and by 2021 it was generating almost $27 billion, that's no small feat.
Of course, sales skyrocketed, as we knew after the start of the situation, since people were investing in offices, computers, homes, games, and let's just say that all of this, our whole lives ended up revolving more towards microchips, the metaverse, everything, etc., etc., than going to the mall. And obviously, digital native companies needed more capacity for their own servers.
Nvidia took advantage of the change in consumer behavior, selling its products at higher prices and generating a gross profit margin of over 62 percent for three consecutive years. In fact, Nvidia's hard-to- replicate products have allowed the company to increase earnings per share at a compound annual growth rate over the last ten years of over 32 percent.
It's true that if we take another look at Nvidia—well, its stock—it seems to tell us there are problems with Nvidia. There are headwinds, especially in the short term, as economies have reopened and consumer behavior has changed rapidly. We know that Nvidia sales— let's look at a 15-minute chart to see how it's changing right now after this huge sell-off yesterday—we were down 10 percent on video.
As we said, Nvidia sales were strongly correlated with cryptocurrency prices because, let's say, they can help and do help people obtain digital assets by mining Bitcoin and so on. This is a warning sign for Nvidia right now; they could reduce sales, and in fact, they already are, as they warned in their last quarterly results.
And we ended up cutting their forecast and earnings for the next few quarters even further. Yes, and now we're talking about Intel, but for those who want to invest long-term, this could be seen as a tremendous opportunity to acquire shares of this innovative company at extraordinarily low prices. We're talking about prices, not formation, but we're still trading at almost 40.
Look, here we have a forward price of 38.65, so it's not cheap, but realize that with the whole situation, what has happened is that we've jumped ahead a couple of years, and now We're simply going backwards. What does all this mean? Now let's put it on screen. Imagine this is the trend for Nvidia. Well, what was happening is that during the situation, it skyrocketed, and now, let's say, we have to return to normal.
We'll come back here and continue. Right now, in my opinion, for Nvidia, we're at this point. No, we're not yet in the zone where we should be. Well, excuse me, I think we're at this point. We've already passed, let's say, the average price at which Nvidia shares should be trading. We haven't reached the bottom yet, in my opinion, but in one or two quarters, I think we have a lot of upside.
But anyway, this was for the Nvidia sections. If you're obviously more oriented towards value investing, you say, " Bernardo, how are you going to buy a semiconductor company at 40 that's totally cyclical with everything that's going on, with inflation, when you have a forward of 13? What do you say about Intel?
Intel is and has been struggling due to weak demand and competitive margins, especially in its server and desktop product categories." Central processing: the company's second-quarter performance was certainly very disappointing, with revenues plummeting 17% year-over-year to below $15.5 billion and adjusted earnings per share falling 79%.
At the same time, this chip, which is what was happening, has a valuation that is hardly growth-dependent, and its shares are trading at only, well, right now, as we said, 13 times next year's expected earnings. Intel also pays a fairly reasonable dividend of 4.98%. It's good that the company shouldn't reduce its dividend payout and should concentrate its resources on growth initiatives.
That's a question on which investors in general, and markets in general, seem to be divided. But Intel's ability to support the payout has improved thanks to the financing options derived from the new Chips and Science Act recently passed by Joe Biden's Democratic administration. The stock's performance could...
To provide some short- term protection if volatility continues to affect the overall market, Intel is also improving, or if you 'll excuse me, preparing itself to improve its competitive position in key categories. It's a move to secure early access to next-generation semiconductor manufacturing machines.
In the holding swaps, which we have right here on screen, it's up 154 percent today, and this could suggest that it has some promising chip designs that, in theory, could help it start to recover in a few years. Also, historically speaking, every time we see Intel at these prices, well, it seems to have been a good opportunity.
Not if we look at it monthly, notice that we have to go back to 2017 to find Intel at these $29. Every time Intel, over the last four years or so, has fallen below $38 or $40, it has been a pretty clear buying opportunity, and let's say it has given us some short-term stabilization. Also, the chip product portfolios seem weaker than Nvidia's and its The recent trade slowdown is more dramatic as we understand the corrections we have in Intel's stock, of almost 80 percent, which were running out of steam.
But in video as well, as we said, it trades approximately 41 times next year's expected earnings. In circus, it uses a forward, as we said, of these, almost right now we don't have a screen of 38.80 and 12.6 times expected sales. Even after these big liquidations, right now the sales are at 1237. The more conservative valuation of Intel makes it, in my opinion, more attractive to value investors.
Apart from its possible turnaround potential, it could make it the best buy in the current market. However, in my opinion, the strengths it has right now, apart from its Jeep and high-performance chips, I know that they can be used for data centers, artificial intelligence, and basically everything that the future holds for us.
Part of Nvidia, if we didn't have Nvidia, our future would be much slower. In my opinion, it seems to me that they have helped it grow at a much faster pace and generate higher margins in recent years. It can probably continue to do so, as the company's position and the overall semiconductor industry seem more solid than Intel's and Nvidia's.
It's probably the best stock for growth-oriented investors, but if you're really worried right now, well, with the kind of volatility we're seeing in the market, Bernardo, I don't want to buy something so expensive. If you're really worried that the Nasdaq might continue to fall, Nvidia might have to fall a little more.
If we take a look, it seems that Intel can find itself quite comfortable at these 29-27 levels, although, as you can see, it surprised us quite a bit by falling below 32. However, if we take a look, it seems that Nvidia could still have a little more room to grow, especially if it breaks these $124.
And if it breaks these $124, we don't really know where the bottom might be. So, if you're really more worried about valuations, if you're a little more worried about volatility, Intel might be the best buy for investors. You might prefer that, but we prefer to invest in companies with less conservative valuations and more long-term potential, like Nvidia.
It will be the best option, quite the opposite of other investors who are worried about volatility. If you want something cheap in terms of earnings, Intel is probably the best option for your portfolio. This is a case where choosing between stocks should depend on each person's personal appetite and risk tolerance, as well as the evaluation.
It comes down to the relationship we have between each company's valuations and our growth prospects. Also, realize that in my opinion, it's not yet time to buy, to jump headfirst into both companies. In about seven days, we have the Fed meeting. I expect a pretty big shock. It doesn't matter if you go up 5.
I hope that... and Powell after Jackson Hole isn't the king. Powell before Jackson Hole, before Jackson Hole, after Jackson House, he's someone else. And Powell, that's one and then another. Keep thinking about what we're seeing: more and more headlines about big tech companies laying people off. And what happens when they lay people off in tech companies that don't need more computers?
They're not hiring. You need less demand. There's not going to be much demand for these kinds of stocks in the coming quarters. We still have some uncertainty with the US, which is threatening China to prevent an invasion of Taiwan, Xi Jinping wanting to be declared president for life next month, etc., etc.
We're not out of the woods yet. It's true that if you want to build a position of 100 shares, I would calmly buy between 10, 15, 20, and 25 shares right now, buying them halfway through as they fall over time, trying to apply a bridge strategy to end up with a good price. Because, let's be honest, we'll never be able to buy the top and sell the bottom; that only happens in fairy tales.
Ladies and gentlemen, let me know if you're buying Intel, Nvidia, or Johnson & Johnson, which today reaffirmed its position. They've launched a $ 5 billion share buyback program, 0.25 percent of their market share. And the truth is, it's a way of... and where are we headed? I think defense won't hurt us either, Carlos Sobera down here.
What are you buying? What are you not buying? Are you not interested in semi-annual interest? And as always, I decided to give them my vote. Thanks. I like it. Subscribe to the bell icon. Check the links in the video description if you want to invest with me in our private group. I spend a lot of time in it.
We chat, exchange ideas, exchange opinions, get exclusive content, and much more. Every time I buy and sell stocks or options, I let you know. And ladies and gentlemen, as always, I hope you enjoyed it, and we'll say goodbye until next time. Yes
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