August 28th, 2023 | 07:00 CEST
AI hype soon over? Deutsche Bank, NVIDIA, Globex Mining
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"[...] As we look at four or more zones in more detail from the beginning, investors can expect a continuous news flow that will underscore our vision of the Holy Grail project as a giant opportunity. [...]" Nick Luksha, President, Prospect Ridge Resources
NVIDIA: Even AI partner Deutsche Bank remains cautious
Last week, chip manufacturer NVIDIA scored with outstanding quarterly figures. Quite a few observers had expected that the share could initiate a correction immediately after the figures. The phenomenon of sales following positive company announcements is quite common. However, NVIDIA's results were so good that the stock exploded again. Still, investors should keep in mind that NVIDIA by no means has some sort of monopoly on AI-related sales. The Company produces relevant chips, and computing power is always needed in AI applications. That said, NVIDIA is also far from unrivaled. The billion-dollar subsidies into the chip industry in recent months indicate that there could soon be an oversupply of chips.
As in the past, subsidies play a decisive role in this. If the state guarantees subsidies, companies need not fear overcapacities, at least in the short and medium term - after all, the investment was low-risk thanks to the state support. If, as is currently the case, several subsidy-driven investments come together, this can lead to oversupply on the market in the long term. Even Deutsche Bank - NVIDIA's AI partner - maintains its Hold rating for the highly sought-after chip stock. However, the German bankers raised the price target to USD 560. Accordingly, there would still be a little more than 20% air to the upside.
"Adyen Moment" in the chip industry not off the table
From a chart perspective, the recent hype may have been a flash in the pan - the stock failed to break above the July high. In addition, the market should continue to expect extraordinary things from NVIDIA in the coming quarters. The risk of the Company disappointing investors in the near future is not off the table. The danger of NVIDIA experiencing their "Adyen Moment" remains.
Globex Mining as a beneficiary of several trends at once
But where do opportunities even lie in the stock market? One industry that is benefiting from both global subsidies, the nearshoring trend, and digitization and the increased use of AI is the commodities industry. Whereas critical metals, such as the rare earths needed in chips, rechargeable batteries and other modern technologies, used to come predominantly from China, alternative deposits are now moving into the spotlight. The same applies, with some exceptions, to vanadium, lithium and other industrial metals.
The Canadian company Globex Mining is an investment company with over 200 raw material projects in its portfolio. The unique feature: All projects are located in North America. The trend of nearshoring states that supply chains are increasingly regionalized. Instead of relying on lithium from South America, which may not be mined in an ESG-compliant way and where there may be dependencies on China due to credit, more and more corporate decision-makers prefer suppliers from safe jurisdictions. The US and Canada are among the top choices for products that are also manufactured in North America. Examples include e-cars, semiconductors and products related to regenerative energy.
Alkali deal creates fantasy - market capitalization of only CAD 45 million
For about a week, the share of Globex Mining has been on a small upward flight - the Company, which is currently valued at only about CAD 45 million, has gone up by about 10%. The share price increase may also be due to a transaction the Company announced last week. Accordingly, Edison Lithium wants to acquire exploration rights to alkali projects in the Canadian district of Saskatchewan from Globex. The deal calls for a small cash payment of just USD 35,000, but the further details have more potential: In addition to 156,250 shares of Edison Lithium, Globex will also receive a 2% contingency based on sales of any potential commercial production from the properties. Such alkali projects are related to heat storage, innovative battery technology, and application areas such as the glass and paper industries.
Globex Mining's stock offers access to numerous resource projects around almost all common commodities. The recent exit suggests that more gems remain dormant in the Globex portfolio. Instead of selling the projects, Globex relies on selected partners to develop projects and secures a share of the profits. This business model could attract attention if commodity prices continue to rise. Investors can take a closer look at Globex as a speculative underlying investment - while greed rules around AI and high volatility is to be expected, Globex Mining stands for tangible values, which are somewhat underestimated than overestimated by the market.
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