Strange things are happening in Tech Land. Nasdaq sets an 11-year new high. Microsoft (NASDAQ:MSFT) share price climbs over 30. Intel (NASDAQ:INTC) set's a new 52-week high after warning in the 4th quarter. Apple (NASDAQ:AAPL) sets a new 52-week high after smashing 4th-quarter earnings expectations. Qualcomm (NASDAQ:QCOM) hits it out of the park on earnings and guidance. Marvell (NASDAQ:MRVL) and Nvidia (NASDAQ:NVDA) warn and their stock prices go up. More on Nvidia later on.
What does all of this mean and more importantly what is driving this?
The U.S. January employment report shows an add of 243K jobs handily beating expectations. ISM Non Manufacturing PMI rises to 56.8 in January vs. 53.0 in December. ISM Manufacturing PMI rises to 54.1 in January from 53.1 in December. JPMorgan Global Manufacturing and Services PMI hits an 11-month high for January...54.6.
24/7 news coverage of the Facebook IPO filling. Non-stop coverage and speculation was like a light switch for investor sentiment. It reminds me of the late 90s and the internet IPOs. But this time the new social media companies actually have revenue and profits from solid business plans prior to IPOs.
Apple and Qualcomm of course lead the way but a strange thing happened when Qualcomm reported its stellar 4Q results and excellent 1Q guide. Nvidia (+6%) went up more than Qualcomm (2.4%) after the Qualcomm's earnings release.
Apparently Qualcomm was priced for perfection and Nvidia was priced for disaster. Nvidia is a solid company, which is in the 4th year of re-inventing itself. From a PC Graphics (GPU) company solely dependent on PC growth to a mobile processor company while still taking 60% of the PC GPU share. With Nvidia converting to 28nm GPUs this quarter, it should be able to maintain its share of the GPU market against AMD. There are even reports that Kepler (28nm) GPUs will be in some of Intel's Ultrabook models, which is a positive. Plus Nvidia has 90% of the highly profitable workstation GPU market with the Quadro GPU.
Tegra 3, its quad core mobile processor, is already out in one 10-inch tablet from ASUS, with another smaller 7" ASUS tablet priced at $250 to follow, and many other manufacturers to surely follow. At the Consumer Electronics show this January, Nvidia's CEO showed a Tegra 3 tablet running Windows 8, which down the road could be a very big deal if Nvidia can encroach on Intel's and AMD's duopoly of the PC market. This will have to wait until later generations but Nvidia has made it no secret that ultimately that is the intent. Another impetus for Nvidia's stock will come into the lead-up to the World Mobile Congress show in Barcelona toward the end of Febuary. There are expectations that HTC, LG, and Fujitsu will all introduce smartphones with Tegra 3 as the processor.
In addition, Nvidia has $4.50 a share in cash and a GAAP forward PE of 16.8. Note: almost all other semiconductor companies are compared using Non-GAAP earnings, which inflate the E side of PE by 20% on average.
I have decided not to fight the obvious and now recognize the economy is getting better. My chosen way to profit on this new emphasis on Tech is Nvidia . Note: I was pleased to see that Jim Cramer on his show Friday also said that Nvidia was a buy.
Another way to profit on the renewed interest in tech is the Nasdaq 100 ETF (QQQ).
Disclosure: I am long NVDA.