Missed Out on Nvidia Stock? Buy This Spectacular Artificial Intelligence Stock Instead

Summary

This 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

00:00

🚀 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.

05:00

📈 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.

Keywords

💡Nvidia

Nvidia is a leading technology company known for its graphics processing units (GPUs) and artificial intelligence (AI) technologies. In the video script, Nvidia's stock price surge over the last five years is highlighted as a missed investment opportunity for some investors, emphasizing the company's success and its association with AI advancements.

💡Stock Price

Stock price refers to the cost at which shares of a company are bought and sold. The script discusses the significant increase in Nvidia's stock price, which has risen dramatically from a low of $372 to $131 per share, indicating the company's strong market performance and investor interest.

💡Investment Opportunity

An investment opportunity is a situation where an asset or venture is considered likely to yield a profit. The video script suggests that while some investors may feel they have missed out on Nvidia, there are other AI-related stocks, like ServiceNow, that present new opportunities.

💡ServiceNow

ServiceNow is a company that provides cloud computing services to automate enterprise operations. The script highlights ServiceNow as an alternative AI stock for investors who believe it's too late to invest in Nvidia, showcasing its growth and potential in the AI market.

💡AI Technology

AI technology, or artificial intelligence, refers to the simulation of human intelligence in machines that can perform tasks that would normally require human cognitive abilities. The script emphasizes ServiceNow's investment in AI technology and its first-mover advantage in the market.

💡Revenue Growth

Revenue growth is the increase in income generated from the sale of goods or services. The video script illustrates ServiceNow's impressive revenue growth from under $2.5 billion in 2019 to $9.47 billion, demonstrating the company's expansion and success.

💡Cash Flow

Cash flow refers to the net amount of cash moving in and out of a business. The script mentions the increase in ServiceNow's cash flow from operations, indicating the company's financial health and ability to generate profits.

💡Remaining Performance Obligations (RPO)

RPO represents the contracted revenue that a company has not yet recognized, which will be realized in future periods. The script uses RPO to show ServiceNow's strong future revenue potential, as it has increased faster than current RPO.

💡Return on Invested Capital (ROIC)

ROIC is a metric that measures how efficiently a company is using the capital invested in it to generate returns. The script points out ServiceNow's improvement in ROIC, which has increased from less than 6% in early 2022 to 22.4%, reflecting the company's enhanced profitability.

💡Valuation

Valuation is the process of determining the value of an asset or company. The script discusses ServiceNow's forward PE ratio, indicating that the company is fairly valued in the market, which is important for investors considering the stock's potential for future growth.

💡Artificial Intelligence Market

The artificial intelligence market refers to the economic sector involving AI technologies and solutions. The script predicts that the AI market will grow significantly, with an expectation of more than $1 trillion in annual spending worldwide in the next decade, positioning ServiceNow and similar companies at the forefront of this expansion.

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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