Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Wednesday. Today is Wednesday, April 1st. April Fool's Day.
And I have something for you today that is going to sound like an April Fool's joke. But I promise you it isn't.
Amazon has not been this cheap since the 2008 financial crisis. The Great Recession. And for the first time in its history, Amazon is trading at a discount to Walmart — despite the fact that Amazon's top line growth is expected to be around 12% to 13%, while Walmart's is expected to be around 5%. Think about that for a second.
Or consider Nvidia. Nvidia is trading at its lowest forward PE in seven years — 19.9 times. It has not been this cheap on a valuation basis since before the AI boom. Apple, by contrast, is trading at 28 times forward earnings. Microsoft and Meta are both around 20 times. And Nvidia — the company at the center of the entire AI revolution — is cheaper than all of them.
What a gift down markets are. I genuinely love them.
So why are these stocks down? Wall Street is not happy with the AI spending. These companies are putting $100 to $200 billion a year into AI infrastructure, and the hedge funds and mutual fund managers who have to post good numbers every single quarter are saying, we don't see a clear path to ROI. So they're selling and moving on.
But here's the thing about having a slightly longer view than 90 days. One of two things is going to happen with all that spending.
Either they get a return on it, and the stocks soar over the coming years. Or they don't get a return on it, and they stop spending — and the stocks soar because the cash flows improve dramatically. Either way, you end up in the same place. These are great businesses at historically cheap prices.
I think about it the way I'd think about buying a private business.
Would the Iran war stop you from starting a business?
Would the price of oil? Of course not.
If you believe in the business, you invest your money and your time and you let it run. The question isn't what happens this quarter — the question is whether these companies will be more dominant in five to ten years than they are today. Will they be earning more money? Will they be at higher valuations? The answer to all of those is very likely yes. And in the meantime, you're buying them at prices that don't stress you out, because you're not worrying about whether the stock goes up or down on any given day.
That's the beauty of owning great businesses. You put them away and you don't lose sleep over them.
So here's where we stand. A month ago when the war kicked off, we put the four-step playbook into effect. Get rid of your weakest positions. Park your cash in short-term US treasury securities. Prepare a shopping list of the stocks you've been watching. And then get ready to pounce.
We are now at step four. Get ready to pounce. Some of these names look very, very attractive to me right here at these valuations.
That's why you need to check out my #1 AI play for April.
It's a tiny supplier critical to the success of NVIDIA's new superchip.
Not only that, they have over 6,800 patents that Apple, Google, Amazon, and even NVIDIA itself must license…
NVIDIA tried to buy them outright. The FTC said no.
Now billionaires are quietly piling in.
The last time NVIDIA's suppliers got this kind of spotlight, they delivered 164% in a single day, 416% in 60 days, and 2,815% in under two years.
Get my #1 AI play for April here.
Have a wonderful day. I'll speak to you tomorrow.
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