Since the second half of last year, the global stock market has clearly seen value stocks outperforming growth stocks. I think the reason was growth stocks overvalued. The core driving force behind the growth stocks outperformance over the past decade is zero interest rates. When the cost of capital is zero, the opportunity cost is theoretically infinitely high.
Accompanying the Fed, Bank of England, Bank of Canada and other major economies began to tighten monetary policy, withdraw from QE, raise interest rates, etc. and the cost of funds began to rise. The value of value stocks investing is starting to emerge. I think this long-cycle factor rotation is just getting started and will likely continue for several years. Therefore, this year is expected to be the return year of value stocks investing.
That being said, there is one growth stock that I'm particularly bullish on, and one that has great potential for the next few years.
NVIDIA Corporation (NVDA)
Market Cap - $754billion
Nvidia is one of the companies that I'm most optimistic about in the next few years, especially now that everyone is focusing on the metaverse and NFTs, so the upside of Nvidia will be huge.
I think a lot of technological development is inseparable with Nvidia in the future. Why? If you think cloud computing will be the future trend, then nearly 98% of the AI accelerators of the four major cloud providers AWS, AZURE, GOOGLE CLOUD and ALIBABA CLOUD are using Nvidia GPUs. The matrix operations required for AI are only supported by GPUs. The leading company of this GPU is none other than Nvidia.
If you think blockchain will be the trend, then the powerful matrix computing power provided by Nvidia's GPU is very suitable for Ethereum mining.
If you think that the Metaverse is a major trend in the future, then I believe you and I agree with the Nvidia company, because the virtual reality of the Metaverse requires a lot of image processing capabilities, which is none other than Nvidia.
In addition, the company launched “Omniverse” design platform and a 3D modelling. Nvidia CEO Jen-Hsun Huang pointed out that he estimates that half of Omniverse's future revenue will come from chips and half from developers. In his vision, the platform will have 40 million developers in the future, and they will earn $1,000 a year from each, or $40 billion overall.
Finally, the acquisition of ARM will be announced this year. The current market expectation is that this plan will not be successful, but if it is successful, it will bring huge benefits to the stock price.
Apple (APPL)
Market Cap - $2.94Trillion
It took Apple about 16 months to go from $2 trillion to nearly $3 trillion. Apple's rise at the end of last year is obvious to all of us.
Survey data shows that 1/4 of Apple's customers have not replaced new mobile phones. Due to Apple's strong user stickiness and the beginning of economic recovery, the chip supply chain is also expected to return to normal by the end of this year.
Aside from the iPhone13, this year's most attention will be the AR/VR smart headset that may be launched at the end of this year, but the rumour said that this may be delayed until 2023. I think by the time they launch the product; Apple's stock price may also be pushed up by the market.
Influenced by some negative factors of rising interest rates and inflation , this means that market funds may flow to companies with strong profitability, stable growth and reasonable valuations, and Apple is a typical such company.
JP Morgan Chase (JPM)
Market Cap - $472Billion
JPM Q4 achieved revenue of $30.35 billion, market expectations were $29.9 billion, and net profit was $10.4 billion. JPM is also the largest bank in the United States in 2021. It still records a net profit of $48.3 billion, which is a record high with revenue of $125.3 billion.
The most difficult thing to get in the financial market is certainty, but in 2022, we can be sure of rising interest rates. The best performer under interest rate hikes is the banking sector.
Among them, retail banks have benefited the most, as housing loans, car loans and commercial loans have all brought benefits to banks under the increase in interest rates, and JPM is one of the typical banks.
In its fiscal 2022 outlook, JPMorgan expects net interest income, excluding markets to reach $50 billion in the fiscal year, largely reflecting credit growth and expectations for rate hikes.
This article was written by Soon Joo
