 Hey everyone, this is Dan with another episode of my AMD and NVIDIA videos. Since I posted my last video on this topic about a month ago, both AMD and NVIDIA moved up in the direction that I predicted. There have been quite a few positive developments for the two companies in the last few weeks. Particularly, the latest developments on the metaverse will profoundly impact AMD and NVIDIA. I will spend a few minutes in this video to talk about metaverse and, as usual, I will talk about my new valuation for the companies. Let's get into the details. First of all, let's look at the charts for AMD and NVIDIA in the last 6 months. This is a daily chart. As you can see, AMD, which is the candlestick chart, went up by about 95-96% in the last 6 months. NVIDIA went up by about the same amount. If you look at the broad market, QQQ, which is the blue line here, went up by 18%, not nearly as good as NVIDIA and AMD, and SPY went up by even less than that by about 9-10%. Definitely, AMD and NVIDIA have been performing very well. As far as my price predictions from my last video, which was posted on October 30, I predicted that AMD would be at $160 a share and NVIDIA at $280 a share by the end of January 2022 next year. When I posted that video, AMD was at $120 and NVIDIA at $255. As of today, November 30th, AMD is at $158, definitely went up quite a bit, and NVIDIA is at $326, also went up a lot, and actually NVIDIA already exceeded my price target. I will certainly be posting new price targets in this video, and I'll get to that in next few minutes. Stay tuned. Because I will spend quite a few minutes talking about metaverse in this video, I will not repeat what I already covered with regard to some of the fundamentals related to the two companies. If you're interested, you can refer back to the October 29th video, which looked like this. In that video, I talked about the company profiles, the products, their merge activities, market share, product performance, benchmarking, and all these other things. So please do look back to that video if you want to have more details on the fundamentals of the two companies. Let's talk about the metaverse, or it's called the omniverse by NVIDIA. Metaverse is a fairly new word. It covers what used to be called 3D or three-dimensional computer simulation. But in addition to 3D simulation, metaverse or omniverse also leverages some of the latest computer technologies, such as 3D visualization, such as what you can do with the Oculus goggles. So by Facebook, or now it's called Meta, and voice recognition, motion sensing, artificial intelligence, voice synthesis, and even more features. As you incorporate all these high-tech features into your computer system, or even onto your cell phone in the future, what you have is the metaverse or omniverse. Up until now, the most active use of metaverse is the video gaming industry, which is estimated to be worth $180 billion in 2020. The gaming industry is very computational intensive, and that's why NVIDIA and AMD have been selling a lot of processors for the gaming industry. NVIDIA's version of metaverse, which they call omniverse, emphasizes industrial and commercial applications, such as using 3D simulation to build sections of a city in the virtual world. Then they can decide how to place cell phone towers to cover most areas effectively. Or you can use metaverse to design the entire factory in the virtual world to check for placement of equipment, how to run pipes and ducts before the factory is even built in the physical world, which will lead to significant savings in time and money. The company Meta, or Facebook, also has been promoting its version of the metaverse. Metaverse emphasizes education, office automation, and telecommuting. Microsoft has also been promoting metaverse. Just like when we find a 5-year-old cell phone to be antiquated because it's too slow and lacks the high-resolution camera and high-resolution display and other latest apps on a new cell phone, we will find our cell phones and computers today to be obsolete a few years from now because of the advent of the metaverse. We will pretty soon want to operate in the metaverse or interact with our computers and cell phones in the metaverse in a 3D environment instead of the mostly two-dimensional world we see today on our cell phones and computers. Even a presentation like this will become obsolete because this is in 2D. Pretty soon people will be demanding 3D presentations, just like black and white presentations have become obsolete. Imagine how many semiconductor processors will have to be provided to power the data behind a metaverse, and that just means more businesses for companies like AMD and NVIDIA. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button that will enable you to receive notifications when I publish my next video. It will also encourage me to make more videos like this in the future. Thank you very much. Let's continue. We have a lot more to cover. Let's talk more about AMD. Recently, as of November 30th actually today, it was announced that Tesla has agreed to purchase AMD Ryzen processors for their Model Y vehicles. Although at this point, it will only be implemented in China, but I won't be surprised that later on Tesla also implements the AMD processors on their cars made in the United States. That's definitely a big boost for AMD. Now November 8th, it was announced that AMD won the partnership with Meta or Facebook to equip the data center with semiconductor chips. And definitely that's a big win for AMD because Meta or Facebook is committed to expanding the business activities and sales volume in the Metaverse area. In my last video, I talked about the AMD side links merger. I won't repeat the same bullet points. Just want to highlight two or three bullet points here. Number one is targeted to be completed by the end of 2021. It's a $300 million merger that will be funded by doing a stock exchange and issuing new shares of AMD stock. Xilinx is expected to enhance AMD's coverage in the field programmable gate array market. And there will be also synergy between the two companies which will lead to cost reduction. From what we heard, the Xilinx acquisition is reaching the final stage. It already secured approval from the EU, from UK, from the US government. And the last piece is to secure the final approval from the Chinese government. As far as AMD strength, I won't go through every single bullet point. The most important strength is that they have been increasing the CPU market share and they've been increasing their revenues and EPS very significantly since 2016 ever since they had the new CEO. And the partnership with Meta is definitely important as well as a new deal with Tesla and the Xilinx merger. As far as witnesses, AMD does not have their own foundry, but they're not any more disadvantaged than NVIDIA, which also does not have their own foundry in the same Qualcomm. Many of the semiconductor companies design chips, but they don't fabricate their own chips. They rely on such as Taiwan semiconductor or Samsung to build the processors. In the GPU market, the performance of AMD chips and the market share of the AMD chips have been trailing NVIDIA, which has 80% market share. Let's look at their financial data. The sales have been growing nicely ever since 2016. And if you compare the sales increase to Intel, which is the green line here and the industry average, definitely they're outperforming both Intel and the industry average. The EPS definitely has been growing very fast since 2016. I drew this dotted line to predict their future EPS growth in the next five years. And the slope of this line represents 35.3% annual growth in EPS. And as you compare that to the historical growth since 2016, the 35.3% growth is very conservative. I'll actually be using this number for my calculation of the stock price of AMD. So let's talk that in the back of our mind. The return on equity has been pretty good, also increasing since 2016. At this point, they're better than Intel, better than industry average. Debt to capital ratio is very impressive. It's been declining quickly. That means they've been paying off the debts while making a lot of profit, generating a lot of cash. For the valuation, first I looked at the market cap, the trailing P ratio, forward P ratio and PEC ratio for the leading semiconductor companies. AMD is here with the trailing P ratio of 49.94 now. And the forward P ratio according to Yahoo are 48.62. For my assumption for the next few years, I assume the P ratio will be 40, which is very conservative compared to the current trailing and forward P ratios. And the EPS growth of 35.3%, remember we saw that in the last page in that chart. And the last five years, their EPS growth was actually 39.8%, therefore 35.3% is a very conservative estimate. And based on the current stock price, market cap and net income, I calculated the figures for 2021-22-23 based on these assumptions and arrived at the stock price of 143 for 2021, 193 for 2022 and 261 for 2023. And from this range of numbers, I decided to set my target at $180 a share by the end of January 2022. Let's talk about NVIDIA. This is the chart showing the GPU market share of NVIDIA. GPU is the main product of NVIDIA. As you can see, NVIDIA has 83% of the market share. And the rest of the market share, 17% belongs to AMD. As I mentioned, GPU is the main source of revenues for NVIDIA. Currently they have 83% of the market share in the GPU market. More impressively, they have 90% market share in the supercomputer accelerator market. In addition to GPU, NVIDIA has been building data processing units, DPU, and also they're getting into the traditional CPU market to challenge head-on Intel and AMD. Definitely, this is not a company that's sitting still. They are growing, expanding, and continually coming up with new ideas. But on NVIDIA's strength, I would not read through every single bullet point. Just want to highlight that they have the leadership in the GPU market. And recently the CEO of NVIDIA said that he estimated the metaverse or omniverse sales will soon approach $40 billion a year. Let's hope he's right because that will be greatly beneficial to NVIDIA and actually also beneficial to AMD. They will definitely benefit from the fast growth in the gaming business because the gamers like to use graphic cards, specifically graphic cards from NVIDIA. And they have the leadership and continual development in deep learning and AI by virtue of the power of the processors. They have some weaknesses. For example, they are dependent on semiconductor foundries to build their processors just like AMD. And they're facing competition from AMD now in the GPU market, although NVIDIA still has more than 80% of the market share. They are also trying to merge with this company ARM, which has a design license that's used by almost every semiconductor company. However, this merger might be blocked by the UK government and also by EU. At this point, the chances of having the merger between ARM and NVIDIA is at best 50-50. But it's not going to affect my valuation of NVIDIA, whether they merge with ARM or not. Let's look at their financial data. Their sales are being growing very impressively, definitely outpacing Intel and the industry average. The EPS has been growing very fast also. And I extrapolated the EPS for the next few years with a 39.4% annual EPS growth, which is a dotted line here, as you can see. That's a fairly conservative estimate compared to the EPS growth since 2015. And we will be using this number 39.4 in the next slide. Return of equity is shot up in 1916-17, and then it came down a little bit. It's pretty much on par with the industry average at this point and with Intel. That to capital ratio is shot up recently, but it came down a little bit in the last quarter. Apparently, they are building up towards something big. But at this point, it's just about the same as the industry average. NVIDIA is definitely a very powerful sales profit and cash generating engine. For valuation, again, I look at the trailing PE ratio for PE ratio for the leading semiconductor companies. NVIDIA is here with the trailing PE ratio 102, which is pretty high. But then they have the fast growth to justify that. And the PE ratio is 64.1A, given to them by Yahoo, although as you remember in the last page, I'm only assuming an EPS growth of 39.4%. In the last five years, their EPS growth is at 52%. Therefore, 39.4% is a very conservative estimate. For PE ratio going forward, I assume 70, which is much smaller than the current PE ratio of 102. And then using the current stock price market cap and net income, and based on these assumptions, I extrapolate their stock prices for 2021, 2022, and 2023 and arrive at these figures. And from this range of numbers, I decided to pick $360 a share as my target to be reached by the end of January, 2022. Let's look at the analyst's opinions. I'm comparing here the analyst's opinions from October 29th to today, November 30th. The price for AMD went up from $120 a share to $158 a share, and my target was $160 a share. And now I'm increasing that to $180 a share to be reached by the end of January, 2022. Yahoo Business maintains their buy rating and maintains their high target. The average target went up from $133 to $141, and low target went up a little bit from $100 to $101. TipRanks.com maintains their moderate buy rating and keeps the same high rating. The average rating went up from $137 to $141, and they keep their low rating at $113. CN Money maintains their buy rating and also keeps their high target at $180. Their medium target went from $138 to $140 just a little bit, up a little bit, and the low target went up from $77 to $80. Luz Navalier actually upgraded the stock from an overall C rating to B rating, that's a buy rating. And the quantitative rating went up from C to B. Fundamental rating remains at B. For NVIDIA, the stock price went up from $255 to $326. My target now is revised up from $280 to $360 to be reached by the end of January, 2022. Yahoo Business maintains its buy rating and increased their high target from $300 to $400 and increased their average target from $233 to $331 and also increased their low target from $110 to $177. TipRanks.com maintains their strong buy rating, increased their high target from $300 to $400, increased their average target from $241 to $358 and increased also their low rating or low target from $185 to $285. C&Money maintains a buy rating and increased the high target from $328 to $400, increased their median rating from $235 to $350 and maintains a low target at $200. Luz Navalier also upgraded NVIDIA from an overall C rating to a B rating, so that's a buy rating and upgraded the quantitative rating from C to A and maintaining the fundamental rating at B. Overall, I see a lot of upgrades for price targets as well as overall rating particularly from Luz Navalier, so definitely the picture is looking very bullish for both AMD and NVIDIA. What are my strategies? First of all, as I have shared by way of my Twitter account, I bought AMD and NVIDIA shares on November 24th and today because the market was dropping in general, I sold the shares I bought on November 24th for small profits about 1% to 2%. In the meanwhile, I bought shares of AMD on August 11th and NVIDIA on September 22nd and I'm still holding those shares and seeing more than 40% paper gain on those, so I'm doing pretty well so far. In general, I'll be holding some AMD and NVIDIA shares for the long term because I have confidence in the two companies and I've been swing trading the rest of the shares like what I did today. I will sell when the price pulls back at a key resistance level or fails to be supported at a key support level or when adverse news develops like what happened today. The broad market was sinking and I quickly sold the shares I bought on November 24th to lock in my profit and I'll buy when the price bounces back from a key support level or when positive news develops. I'll definitely be mindful of news developments regarding the two companies and I'll be watching for the RSI level for any overboard and oversold situations and I will update my subscribers by way of my Twitter messages. At this point, I'd like to remind you to subscribe to my Twitter account. In addition to subscribing to my YouTube channel, I'd like to remind you again to click the like, subscribe and notification button. As usual, I will very much appreciate your comments, questions and suggestions. Let's recap my price targets. For AMD, I expect the share price to reach $180 and NVIDIA to reach $360 a share by the end of January 2022. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you'd like to buy or sell stocks, you should make your own decisions and you should consult with your financial advisors before you do so. That's about wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.