Japanese telecom giant Softbank has reportedly made a huge $4 billion investment in chipmaker NVIDIA Corporation (NASDAQ:NVDA) via its monster $93 billion VisionFund. Now new rumors have surfaced (via Bloomberg) that VisionFund is considering slowly raising its 4.9% stake as well its active involvement in Nvidia- where it is already the stock’s fourth largest shareholder.
“While we don’t comment on rumors about our investments, we consider ourselves long-term partners to companies, whether private or public,” SoftBank told Bloomberg. The fund, which has a $100 billion target-size, is backed by tech heavyweights including Apple, Qualcomm, Foxcon and Mubadala Investment Company. And investors are keen to track SoftBank’s billionaire CEO Masayoshi Son who made very profitable early investments in both Yahoo and Alibaba.
Son says he wants to be remembered as “a crazy guy who bet on the future”- but is his investment in Nvidia so crazy given that the stock exploded from $33 to $107 in 2016? And should investors be inspired by one of the fund’s most prominent investments? We turned to TipRanks Score system to try and shed some light on these questions. TipRanks Score combines all of TipRanks’ unique market data points on any one of 5,000 tracked stocks to give investors a quick understanding of that stock’s investing potential.
We can see that Nvidia has an overall score of 5.7- which isn’t too high but if we break the score down further we can gain useful insights into the bullish/ bearish components that produced this score:
The stock has a Moderate Buy analyst consensus rating. Five-star Merrill Lynch analyst Vivek Arya falls firmly into the bull camp. He boosted his price target on the stock to $155 (9.3% upside) and called Nvidia a top pick. Arya believes that Nvidia should not feel threatened by Google’s Tensor Processing Units (TPUs) chips. For a start, Nvidia’s chips are compatible with all major cloud services not just Google and second of all, Nvidia says it will benefit from faster adoption of AI which is why it has an ongoing collaboration with Google. The powerful ‘bleeding-edge’ Volta-based gaming GPUs due for launch in 2017/8 should also keep Nvidia out ahead of the pack.
With a score of 7.2 most bloggers are bullish on Nvidia. However, one top blogger suggests that investors holding Nvidia shares should protect themselves by entering a short position in case the stock loses some of its recent gains. But he emphasizes that the short position is just to project the long position as NVDA ultimately has a strong outlook and can execute efficiently.
Insiders have a very low score of just 0.8 with the sale of $36 million worth of shares in the last three months. For example, four days ago EVP Ajay Puri sold $11.5 million of shares. The score does not factor in the SoftBank investment because its investment only equates to 4.9% of the stock rather than the requirement of over 10%.
Hedge Fund Managers
The ‘Smart Money’ was not impressed by NVDA in the last quarter, with hedge fund holdings down by 1.6 million shares- hence the 1.9 score. Philippe Laffont, Theofanis Kolokotrones and Ken Fisher all adjusted their NVDA holding in one way: down. Meanwhile Joel Greenblatt of the $7.88 billion Gotham Asset Management fund slashed his position by 94% to just $2.66 million.
The news is resoundingly bullish on Nvidia with a perfect score of 10. One article even concludes: “If Netflix wasn’t crushing it in its own right, an argument can be made that Nvidia, which has seen its shares rise a whopping 330% in 18 months, should be the “N” in FANG [a synonym for high-performing tech stocks Facebook, Amazon, Netflix, Google].”
Many headlines focus on Nvidia’s May 26 unveiling of the Pascal-based GeForce MX150 for the entry-level market. Details are sparse, but we do know that the new video card uses GDDR5 and performs 33% better than the GeForce 940MX.
Based on crowd insights derived from 120,000 active portfolios on the Smart Portfolio platform, we can see that investors have a positive 7.8 score on Nvidia. In fact, we calculated that Nvidia is the fifth most popular stock for the average investor who has about 5.22% of their portfolio invested in the stock.
What can we conclude from the data? The data points are all relatively high- with the exception of hedge funds and corporate insiders- this is what brings the ultimate score down to just 5.75. Indeed if we exclude these two data points the score comes out at a rather impressive 7.95. And for many investors a $4 billion vote of confidence from a credible investor like SoftBank will go a long way towards overcoming the poor impression these two low scores present.