How to Support the AI ​​Revolution for Less After the Rise of Nvidia

Nvidia is the most talked about company in the world this year.

There has been much excitement surrounding the staggering 161 percent rise in the US semiconductor giant’s shares since January. At the same time, there is also concern about the recent decline in price.

Could Nvidia be a bubble about to burst? Or is this just a blip in the progress of a behemoth that was briefly the world’s most valuable company earlier this month, valued at $3.34 trillion?

This Silicon Valley company controls 90 percent of the market in the ‘accelerator’ microchips that are powering the generative AI (artificial intelligence) industrial revolution.

US investors have poured $8.7 billion into technology funds to gain exposure to this phenomenon, and UK investors could follow suit.

It’s possible to acquire a stake in Nvidia and other Silicon Valley names through mutual funds whose shares trade at a discount to their net asset value (NAV). This offers a chance to diversify, rather than betting on the fortunes of a single company. It’s also a route into Nvidia and other AI pioneers for less money.

Many investors will be skeptical, thinking that hopes for American technological exceptionalism will be disappointed. They see this week’s decline in Nvidia shares as a harbinger of more volatility. This is a fair assessment, given that Nvidia shares have risen nearly 3,000 percent in the past five years.

They are 205 percent higher than a year ago, when this column highlighted the stock’s potential.

But 42 of the 66 analysts who follow Nvidia rate it a ‘buy’. No one recommends selling.

These days, however, backing Nvidia isn’t a one-sided bet.

Daniel Ives of brokerage Wedbush Securities has likened Nvidia’s hyper-efficient chips – known as GPUs (graphics processing units) – to the “new gold or oil of the tech sector.” But like the price of gold or oil, Nvidia stock could continue to rise, or suffer a setback.

Nvidia has achieved an astonishing 57 percent profit margin. But there’s no guarantee this can be sustained, despite the flair of Nvidia’s boss Jensen Huang.

You may already own Nvidia through funds and trusts such as Baillie Gifford US Growth, Blue Whale, F&C, JP Morgan Global Growth & Income and Monks. Alliance and Witan, which are merging, are also holders. But some lesser-known names also support the Nvidia supernova.

Allianz technology

The discount on this £1.49m trust (currently 6%) is shrinking rapidly as Nvidia makes up 9% of the portfolio. Other holdings include Apple, Meta (owner of Facebook, Instagram and Whatsapp) and Microsoft. This trust is one of my rewarding AI adventures.

Canadian General Investments

The £757m trust’s largest holding is Nvidia, although its portfolio also includes the Canadian Pacific Kansas City railway. Railroads are benefiting from another major trend, with companies reshoring, or bringing production back from overseas. The trust’s obscurity may be behind its 41% discount.

Manchester and London

Shares in the £323m trust are up 49 per cent this year, thanks to its AI-focused portfolio. Nvidia accounts for 32 percent.

However, it is at a discount of 15.5 percent. Mark Sheppard from Manchester and London is in the game: he owns 57 percent of the shares. This gives him a significant incentive to reduce the discount.

Martin Currie Global Portfolio

This discount on this £255m trust is just 2.85 per cent. It offers exposure to Nvidia – which makes up 9 percent of the fund – but also to European giants such as L’Oréal. This may be an option if you feel your portfolio contains too much technology.

Polar Capital Technology

Nvidia is the trust’s largest holding at £3.9bn (10 per cent). But it also owns Advanced Micro Devices, another major chipmaker, and TMSC, the Taiwanese maker of Nvidia’s chips. QuotedData, the analytics group, argues that this mix of AI beneficiaries and AI enablers could see Polar outperform its sector in the long term. The discount stands at 6.72 per cent.

Scottish mortgage

Nvidia is the largest holding in this £11.5bn FTSE 100 member fund, whose discount has been reduced to 9% from 20% last summer.

The main reason for the size of this difference is concerns about the nature of the fund’s unlisted shares, which make up 30 percent of the portfolio.

Like other shareholders, I hope that the bosses of these companies adopt the Huang principle of ‘failing forward’.

If you take a chance on something and your first attempt fails, you continually adapt the idea and get better each time.