Unlock Editor's Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
The problem in the future is that it hasn't happened yet. Therefore, betting on companies that exist primarily in educated speculations to be worth it is not for the weak stomach. Nvidia, Palantir, Applovin and MicroStrategy (the four best US technology stocks of 2024) are all investing at a pace with investors.
Nvidia stimulates more cortisol than most through its vast size. The $30 chip maker with silicon powering the artificial intelligence boom almost tripled in 2024, but this year it fell by about 6%. Q4 revenues comfortably beat analyst expectations, but investors are focusing more on what comes next.
For now, everything is planned. Boss Jensen Fan says the company's demand for the new, powerful Blackwell chip is “surprising.” While profitability is narrowed down a bit by the new range, the current three-month revenue should be higher than previously thought. The problem is beyond that, the details are elusive. There are new nail biters every quarter.
Buying stocks in a company is always a bet on a distant income stream. The Lion's share of value comes from “terminal value.” For example, according to Visible Alpha, discount analyst estimates for Nvidia's cash flow for the next five years at 10% per year. In other words, 80% of Nvidia's $30 market value is made up of funds since 2030.
There can be a lot of things happening in those short-time windows. Ask millions of investors who have never heard of Nvidia five years ago. And tech stocks are extraordinarily sensitive to sudden shifts. For example, Nvidia earns about a third of its revenue from just three customers and sells its products to other customers. Sales to China are subject to tariff policies that allow dimes to be turned on, as the Trump administration has already shown multiple times.
The rest of this Fantastic Four have a difficult time. Software company Palantir has fallen into reports that the Pentagon wants to cut its budget. However, it still trades with revenues of around 50 times earlier, and Nvidia's 16th time feels positively stable. MicroStrategy, on the other hand, has its own unique quirk. It is mostly a pig bank filled with Bitcoin, and its prices – always mercury – is calm.
Applovin's reversal is especially sudden. The broker ad space within the gaming app tanked after two short sellers reports suggested that rapid growth may not be more sustainable than it looks. Slower and more predictable companies are far less vulnerable to such attacks on investors' trust in future cash flows.
For Nvidia, at least a few things are certain. Its biggest customers (companies such as Microsoft and Amazon) have cash buckets and are determined to spend it on tips. Currently, there are very few other options when it comes to AI processors. And for now, investors are relaxed. I passed the stress test. The other one will be lined up soon.
john.foley@ft.com
