Important Information
This information is provided for general educational purposes only without regard to your particular investment needs. This material, including any attachments or hyperlinks, should not be taken as investment or tax advice of any kind whatsoever (whether impartial or otherwise) on which you may rely for your investment decisions, nor be construed as an offer, solicitation or recommendation for any investment strategy, product or service. Investors should consult their financial and tax adviser before making investments in order to determine the appropriateness of any investment discussed herein.
Material authored by any particular Artisan Partners individual or team represents their own views and opinions, which may or may not reflect the views and opinions of Artisan Partners, including its autonomous investment teams or associates. Statements are based on current market conditions and other factors, which are as of the date indicated and are subject to change without notice. While this information is believed to be reliable, there is no guarantee to the accuracy or completeness of any statement in the discussion.
All investments are subject to risk, which includes potential loss of principal. Past performance is not indicative of future results.
This material may reference index or other information that is subject to copyright by its respective service provider, including the following: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Frank Russell Company ("Russell") is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell's express written consent. Russell does not promote, sponsor or endorse the content of this communication. The herein referenced S&P index ("Index") is a product of S&P Dow Jones Indices LLC ("S&P DJI") and/or its affiliates and has been licensed for use. Copyright © 2024 S&P Dow Jones Indices LLC, a division of S&P Global, Inc. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). None of S&P DJI, Dow Jones, their affiliates or third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and none shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Source ICE Data Indices, LLC, used with permission. ICE Data Indices, LLC permits use of the ICE BofAML indices and related data on an "as is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness and/or completeness of the ICE BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend Artisan Partners or any of its products or services.
© 2024 Artisan Partners. All rights reserved.
Growth Team Weekly Investment Insights
1) NVIDIA Delivers Again
Fueled by its H100 chip, which has become the industry standard for AI development, NVIDIAs’ earnings have risen more than 700% from a year ago. Looking at the trend in FactSet consensus estimates, analysts were expecting 2024 EPS of just $6 at the beginning of 2023. Fast forward to today and analyst are expecting $25.
Source: FactSet, as of 2/23/2024
Big Tech companies account for nearly 40% of Nvidia revenues, but its customer base has become more diversified. CEO Jensen Huang said industries including automotive, financial services and healthcare were now spending on its chips “at a multibillion-dollar level.” He added governments including Japan, Canada and France were becoming larger Nvidia customers as they harness citizen data to create their own AI models.
Shares rallied on the news, and Nvidia’s has leapfrogged Amazon and Alphabet to become the third-most valuable US-listed company behind Microsoft and Apple.
Source: FactSet, as of 2/23/2024
Given their growing importance in the global economy, semiconductors have been heralded as the oil of the 21st century. After this recent move, Nvidia is now worth more than the entire S&P 500® Index’s energy sector.
Source: FactSet, as of 2/23/2024
2) The ARM Versus Softbank Dislocation
Nvidia is not the only semiconductor company benefiting from the AI boom. Another example is Arm Holdings. Shares exploded higher after reporting better-than-expected earnings results earlier in February.
Interestingly, only 10% of the company’s shares trade because SoftBank owns 90% of the company. After this recent rally, SoftBank’s stake in Arm is worth significantly more than the company itself.
Source: FactSet, as of 2/23/2024
3) Market Marches on Despite Elevated Valuations
Last week continued a broader US market rally in February, despite seemingly elevated valuations. FactSet recently published a note highlighting S&P 500 ® Index valuations. At a forward 12-month P/E of 20X, the index is above its 5-year (18.9), 10-year (17.7), 15-year (16.1), 20-year (15.6) and 25-year (16.4) averages. In fact, prior to January 29, the last time the ratio had been above 20 was February 9, 2022 (20.2).
Source: FactSet, as of 2/12/2024
Some of this can be explained by the different makeup of the index since it is more technology-heavy relative to history. However, eight sectors have forward 12-month P/E ratios that exceeded their 25-year averages (including technology).
Source: FactSet, as of 2/12/2024
4) Replace or Repair?
The Financial Times published an article last week highlighting an issue facing the renewable energy push in Europe. Europe’s installed base of wind power infrastructure is ageing, and a crucial part of Europe’s energy future is a question of what to do with its oldest turbines? Highlights include:
5) Rising German Investment in the US
This Financial Times article highlights an example of rising investment here in the United Statels as supply chains shift. German companies announced a record $15.7bn of capital commitments in US projects last year, up from $8.2bn a year earlier, dwarfing the $5.9bn pledged in China.
German companies announced 185 capital projects in the US in 2023, of which 73 were in the manufacturing sector. Senior executives at BASF and Siemens Energy — two of Germany’s largest companies — said a combination of pragmatic US government industrial policies, a strong long-term market outlook and increasing focus on supply chains was driving US investment.
Artisan Growth Team manages portfolios which held securities issued by Amazon, Alphabet and Microsoft as of 12/31/23. Portfolio securities are subject to change.
Contact the Editorial Staff
Have a question or comment? We welcome your feedback. Comments will not be made public, but will be read by a member of our editorial staff.
Thank you for your question or comment.