Missed Out on Nvidia Stock? Buy This Spectacular Artificial Intelligence Stock Instead
Summary
TLDRThis video explores ServiceNow as an alternative AI investment for those who feel they missed out on NVIDIA's stock surge. Highlighting ServiceNow's first-mover advantage in AI, significant revenue and cash flow growth, and robust remaining performance obligations, the video argues for its strong future revenue visibility. With an improving return on invested capital and a fair valuation, ServiceNow is positioned to benefit from the escalating demand for AI solutions, making it an attractive long-term investment in the growing AI market.
Takeaways
- 🚀 Nvidia's stock price has significantly increased from a low of $372 to $131 per share over the last 5 years, indicating strong performance.
- 🌟 The video suggests that while Nvidia is still a good investment, some investors may feel it's too late to buy and are looking for alternative AI investments.
- 📈 The AI stock recommended as an alternative to Nvidia in the video is ServiceNow, which has a first-mover advantage in AI technology and talent.
- 💹 ServiceNow has shown impressive revenue growth, jumping from under $2.5 billion in 2019 to $9.47 billion in trailing 12 months.
- 💰 The company's cash flow from operations has also increased significantly, from less than $1 billion in 2019 to $3.83 billion.
- 📊 ServiceNow's remaining performance obligations (RPO) are growing faster than current RPO, indicating strong future revenue visibility.
- 📈 The company's current RPO of $8.45 billion is up by 21% year-over-year, and total RPO of $17.7 billion is up by 26% year-over-year.
- 🔢 ServiceNow has a robust return on invested capital (ROIC) of 22.4%, which has improved significantly from less than 6% in early 2022.
- 📉 The demand for AI solutions for productivity enhancements is growing rapidly, positioning ServiceNow well in the market.
- 💼 The company is trading at a forward PE of 45.74, which is considered fairly valued given its revenue growth and operational improvements.
- 🔮 The video suggests holding ServiceNow stock for the long term to benefit from the growing AI market, expected to increase spending by over $1 trillion annually in the next decade.
Q & A
What has happened to Nvidia's stock price in the last 5 years?
-Nvidia's stock price has significantly increased, rising from a low of $372 per share to $131 per share.
Why might some investors feel it's too late to buy Nvidia stock?
-Some investors might feel it's too late to buy Nvidia stock due to its substantial increase in price over the last 5 years, which may make them believe they missed out on potential gains.
What is the alternative AI investment suggested in the video for those who feel they missed out on Nvidia?
-The alternative AI investment suggested in the video is ServiceNow, a company with a strong focus on AI technology and talent.
What does ServiceNow's CEO say about the company's position in the AI market?
-ServiceNow's CEO states that the company has a first-mover advantage in the AI market due to years of investment in AI technology and talent, and that their AI offerings are the fastest selling in the company's history.
How has ServiceNow's revenue grown over the years?
-ServiceNow's trailing 12-month revenue has jumped to $9.47 billion, up from a little less than $2.5 billion in 2019.
What is the significance of the increase in ServiceNow's cash flow from operations?
-The increase in cash flow from operations, from less than $1 billion in 2019 to $3.83 billion, indicates that ServiceNow is not only growing its revenue but also improving its profitability.
What are remaining performance obligations (RPO) and why are they important for ServiceNow?
-Remaining performance obligations (RPO) are contracts signed with customers that will eventually turn into revenue. For ServiceNow, increasing RPO indicates strong future revenue growth as it provides visibility into the company's revenue prospects.
How has ServiceNow's return on invested capital (ROIC) improved over time?
-ServiceNow's ROIC has improved significantly, from less than 6% in early 2022 to 22.4% in the most recent period, showing the company's effectiveness in generating profits from investor capital.
What does the demand for AI solutions indicate about ServiceNow's market position?
-The growing demand for AI solutions for productivity enhancements, especially as labor costs increase, places ServiceNow in a favorable market position with a proven business model.
How is ServiceNow's current valuation assessed in the video?
-ServiceNow is considered to be trading at a relatively fair valuation with a forward PE of 45.74, which is justified given the company's revenue growth, profitability improvements, and market prospects.
What is the potential growth of the AI market in the next decade as mentioned in the video?
-The AI market is expected to increase by more than $1 trillion in total annual spending worldwide in the next decade.
Outlines
🚀 Nvidia's Stock Growth and Alternative AI Investment
This paragraph discusses the impressive growth of Nvidia's stock price over the last five years, rising from a low of $372 per share to $131 per share. It acknowledges the sentiment among some investors who feel they have missed the opportunity to invest in Nvidia. The speaker introduces ServiceNow as an alternative AI investment, highlighting the company's first-mover advantage in AI technology and its rapid sales growth in this area. The paragraph also emphasizes the company's revenue growth from under $2.5 billion in 2019 to $9.47 billion, along with a significant increase in cash flow from operations. The speaker appreciates ServiceNow's ability to grow both revenue and profitability simultaneously, which is a positive sign for investors.
📈 ServiceNow's Revenue Growth and Valuation
The second paragraph delves into ServiceNow's financial performance, focusing on its remaining performance obligations (RPO) and how they indicate future revenue growth. The company's current RPO has increased by 21% year-over-year, while its total RPO has grown by 26%, suggesting a strong pipeline of future earnings. The speaker also points out that ServiceNow's return on invested capital has improved significantly, reaching 22.4% in the most recent period, up from less than 6% in early 2022. This improvement is attributed to the company's effective business model and the growing market demand for AI solutions. The paragraph concludes by discussing ServiceNow's fair valuation with a forward PE of 45.74, which the speaker considers justified given the company's operational capabilities and the potential for growth in the AI market. The speaker recommends ServiceNow as a strong AI stock for long-term investment.
Mindmap
Keywords
💡Nvidia
💡Stock Price
💡Investment Opportunity
💡ServiceNow
💡AI Technology
💡Revenue Growth
💡Cash Flow
💡Remaining Performance Obligations (RPO)
💡Return on Invested Capital (ROIC)
💡Valuation
💡Artificial Intelligence Market
Highlights
Nvidia's stock price has risen dramatically in the last 5 years, from a low of $372 to $131 per share.
Some investors feel they missed the opportunity to invest in Nvidia and are seeking alternative AI investments.
ServiceNow is recommended as an alternative AI investment with a first-mover advantage in AI technology and talent.
ServiceNow's CEO emphasizes the company's rapid sales growth in its AI offerings.
The company has significantly grown its revenue from under $2.5 billion in 2019 to $9.47 billion.
ServiceNow's cash flow from operations has increased from less than $1 billion to $3.83 billion.
The company's profitability and cash flow from operations are increasing in tandem with revenue growth.
ServiceNow's remaining performance obligations (RPO) are increasing faster than current RPO, indicating strong future revenue potential.
The company's RPO and current RPO are up by 21% and 26% year-over-year, respectively.
ServiceNow has visibility into its future revenue with its RPO contracts, suggesting robust growth for at least the next 10 quarters.
ServiceNow's return on invested capital has improved to 22.4%, up from less than 6% in early 2022.
The company's improvement in return on invested capital indicates effective use of investor capital to generate profits.
Demand for AI solutions for productivity enhancements is growing rapidly as labor costs increase.
ServiceNow is trading at a fair valuation with a forward PE of 45.74, reflecting its operational capabilities and growth prospects.
ServiceNow's stock is recommended for investors looking to capitalize on the growing AI market, expected to increase by more than $1 trillion in spending in the next decade.
The video encourages viewers to subscribe for more content and the opportunity to have their investment-related requests addressed.
Transcripts
nvidia's stock price has absolutely
exploded in the Last 5 Years rising from
a low of
$372 per share all the way up to
$131 per share understandably some
investors feel like they missed out on
Nvidia stock like it's too late to buy
Nvidia stock and they looking for
another excellent AI investment lucky
for you I've got just that investment in
this video here so let's take a look at
what a AI stock I think investors can
buy if they feel like they missed out on
Nvidia stock I want to thank the mly
fool for sponsoring this video visit
full.com parev for the 10 best stocks to
buy now all right the AI stock I'm
recommending in this video to those who
feel like they missed out on Nvidia is
service now service now CEO said that as
Leaders seek significant productivity
improvements service now has a first
mover Advantage with years of investment
in AI technology and talent our gen AI
offerings are the fastest selling in the
company's history and we are humbled by
the trust by the customers investing in
our platform now I highlighted earlier
that Nvidia stock has absolutely
exploded and that doesn't mean that I
still don't think Nvidia stock is an
excellent investment still if you feel
like it's too late for Nvidia stock and
you're looking for something different
service now offers a great opportunity
the company over the years has done an
excellent job growing its Revenue as you
can see in this chart here trailing
12mth Revenue has jumped up to
9.47 billion up from a little less than
$2.5 billion in
2019 and that increase in Revenue has
had the impact of increasing cash flow
from operations as well the company's
cash flow from operations in the orange
has jumped to 3.83 7 billion up from a
little less than 1 billion in
2019 I like to see companies increasing
their profitability and their cash flow
from operations as revenue is increasing
I don't like to see companies that are
just increasing Revenue at the expense
of profitability and cash flow service
now has done both where it's increasing
revenue and increasing cash flow from
operations simultaneously
additionally if you look at the
company's remaining performance
obligations which I have highlighted
here you'll notice that it's still
increasing strongly in fact its
remaining performance obligations are
increasing faster than current remaining
performance obligations the difference
between the two is that RPO suggests
Revenue that's going to come after 12
months whereas current RPO is revenue
that's going to come in the next 12
months remember remember remaining
performance obligations are contracts
that service now has signed with
customers and will eventually turn into
Revenue so RPO and current RPO
increasing year-over-year is a good sign
for Revenue growth for service now and
you'll notice that its current remaining
performance obligations at 8.45 billion
was up by 21% year-over-year in the most
recent quarter whereas its remaining
performance obligations of 17 .7 billion
was up by 26% year-over-year in the most
recent quarter if you compare that with
its recent quarterly revenue of 2.6
billion you'll notice that the company's
26 billion in remaining performance
obligations is about 10 quarters worth
at the most recent pace so you have
visibility into the company's future
with its Revenue because of these
remaining performance obligations so
investors can be reasonably confident
that service now will continue to
experience Revenue growth robustly over
at least the next 10 quarters and likely
even beyond that but you have the
remaining performance obligations
contracts that's already signed for the
next 12 to 24 months so that's great
news if you're an investor that likes to
have visibility in a company's Revenue
prospects another metric I really like
from service now is its Improvement in
return on invested Capital up to
22.4% in the most recent period That's
up from less than 6% in 2022 early
2022 remember remaining I'm sorry return
on invested Capital measures how good a
company is at taking money from
investors and investing it into the
business creating products and services
that generate profitability so capital
is what comes from investors and then
returns is what comes from the company
so taking capital from investors and
generating profits that's the name of
the game here and the better you are at
that task the better returns you'll give
your shareholders service now is getting
better and better in this metric as
you'll notice here over the last 3 years
it's improved meaningfully more than 4X
where it was in 2021 late 2021 and now
up to 22.4%
and given the significant improvements
the company is experiencing in demand
for its generative AI products it's
likely that it will continue improving
this metric overall demand from the
marketplace for artificial intelligence
solutions to productivity enhancements
is growing faster and faster as the cost
of Labor is increasing demand for these
Solutions is increasing more quickly so
the company is in the right place at the
right time with a business model that's
proven to be effective that's one of the
reasons why I've liked service now stock
and I'm recommending it here in this
video lastly service now is trading at a
relatively Fair valuation at a forward
PE of
45.74 you'll notice that going back all
the way to late
2021 this is about where this forward PE
ratio has trended it has been lower in
some moments in early
2023 and it has been higher in other
moments before 2022 so this average
valuation here the forward PE of
45.74 I would say is fairly valued for
service now I wouldn't call it cheap I
also wouldn't call it expensive when you
compare it to its prospects in terms of
Revenue growth and cash flow from
operation Improvement so it's Justified
to have this premium valuation because
of the premium operation capability of
the business so when I see a business
like this I'm willing to pay a higher
price for it because it's delivering
better results than most businesses in
the stock market today especially
because it's operating in the AI
category which is expected to increase
by more than $1 trillion in total annual
spending worldwide in the next decade so
I like the company I like the market it
operates in I like the the profitability
improvements and the metrics in the
business model and I like its valuation
as well in combination with all of those
things so if you feel like it's too late
for Nvidia stock which I will remind you
I don't think that's the case I think
Nvidia stock is still a buy but if you
feel like it's too late if you feel like
you missed out then I think service now
is another excellent AI stock you can
buy today and hold for the next 5 10 15
years to capitalize on the growing
effectiveness of artificial intelligence
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