The Nvidia (NASDAQ: NVDA) share price is a thing of wonder. This year’s US tech hero has been bombing along as investors decide it’s the best way to play the revolution in artificial intelligence (AI) and machine learning.
The New York-listed chip maker has rocketed 200.99% in 2023, with annual growth of 160.74%. It’s now a proud member of the trillion-dollar tech club, joining Apple, Microsoft, Google-owner Alphabet and Amazon.
I’ll stop staring now, because if I’d wanted Nvidia to triple my money, I should have bought it on 2 January when it opened at $146.14. At time of writing, its shares cost $430.65. And they trade at 223.92 times earnings, which looks a little toppy to me.
For Nvidia to triple my money now it would have to grow into a $3 trillion company, and even Apple isn’t that big. I’m keen to play the AI trend so I’m pleased to find cheaper options much closer to home, highlighted by Nick Train, portfolio manager at the much-admired Finsbury Growth & Income Trust.
British artificial intelligence plays
The FTSE 100 has much less exposure to fast-growing tech stocks, but as Train points out: “Just because such winners are rare does not mean they are non-existent.”
Some 40% of his trust is allocated to the shares of UK-quoted data, analytics, software and platform service companies. They are Experian, Hargreaves Lansdown, London Stock Exchange Group, RELX and Sage Group.
Train reckons all can harness the power of AI to enhance their own products and services. He picks out information and analytics firm RELX (LSE: RLX). He says it can use AI to enrich its proprietary datasets to support scientists, lawyers and risk professionals around the world.
Investors initially saw AI as a threat to RELX. But they relaxed after chief financial officer Nick Luff claimed it’s more of an opportunity, with the £50bn firm already building the technology into its products. The RELX share price is up 24.34% over the last year, triple the FTSE 100’s 8.28%. Longer-term investors have done even better.
“They are also up 4.5-fold since the start of the 21st century, which is actually rather better than Nasdaq,” Train said.
So the UK is home to at least one digital winner, Train says, and picks out another in accounting software specialist Sage Group (LSE: SGE), whose shares soared 45.77% over the last 12 months, hitting a 22-year high.
Train says management reckons the £9bn company has entered a new phase of growth, providing cloud-delivered software services to small- and mid-cap companies worldwide. Sage is expanding quickly in the US too.
Both stocks have risks, of course. The AI revolution could still eat RELX, allowing customers to dispense with its services. It’s not cheap following its strong run, trading at 25.24 times earnings. The yield is 2.08%.
Sage is even costlier at 33.98 times earnings, way above the FTSE 100 average of 9.9 times. Then again, it does offer superior growth prospects, although these things are never guaranteed. It yields 2.11%.
Both stocks are on my watchlist while I wait to see how AI mania plays out. I wish I’d bought RELX and Sage when they were cheaper, but not as much as I wish I’d bought Nvidia.