Nvidia’s Buyout Bait

Nvidia’s Buyout Bait

They were two of Silicon Valley’s most strategic buyouts ever. And both times, people laughed.

“Remember when Google bought YouTube for $1.65 billion?” asks Paradigm’s AI authority James Altucher.

That was in 2006. It seemed like a princely sum for a storehouse of puppy videos. “Now,” says James, “YouTube prints $40 billion a year.”

More recently, Facebook plunked down $1 billion in 2012 for Instagram.

“Instagram was 13 employees and zero revenue,” James reminds us. “The internet clowned Zuckerberg — a billion dollars for an app that lets you put filters on your lunch?

“Today? Instagram alone makes more than McDonald’s.

“Sure, you could’ve just bought everything the media laughed at and made out like a king,” James says.

“But what if you could see it coming with confidence? What if the market leaves clues?

“You can. It does.

“Think about it. When a company is about to get acquired, someone always knows first. The lawyers. The accountants. The execs. And they don’t leave clues in press releases.

“They leave a special fingerprint in the market.

“Investors who knew how to track these movements -- and what they meant -- made out like bandits.”

For the last four years, James has been using an AI system that’s flagged nearly 85% of the biggest buyouts on Wall Street — all by looking for this fingerprint.

And yes, this system has flagged a buyout this week — one that might well come moments after the market closes today.

“The last time a buyout like this happened,” says James, “the stock jumped 50% overnight.”

Here’s an example involving AI darling Nvidia — which just happens to be announcing its quarterly numbers later this afternoon.

“In 2019,” says James, “Nvidia was riding high on the gaming and AI boom, but there was a problem: Data centers were evolving, and Nvidia wasn’t fully prepared.

“Cloud giants like Amazon, Google and Microsoft needed faster networking to handle AI workloads. And guess who had the perfect solution? A small Israeli company called Mellanox Technologies.

“Mellanox wasn’t flashy. It didn’t make GPUs. But it dominated high-performance networking, making chips that accelerated AI workloads in massive data centers. If Nvidia wanted to stay ahead, it needed Mellanox.”

Sure enough, unusual activity turned up in Mellanox stock during February 2019. “Very specific indicators showed that someone knew something.”

That “something” hit the following month: NVDA was acquiring Mellanox for $6.9 billion, its biggest buyout ever.

“The stock skyrocketed overnight,” James recalls. “Investors who spotted the clues made a killing. The buyout closed in 2020, and guess what? Nvidia’s data center business exploded.

Today, Mellanox’s technology is critical to Nvidia’s AI dominance.”

Maybe you’ve already figured out where we’re going with this: James is seeing identical activity with a small player that’s perfect buyout bait for Nvidia.

And yes, he says there’s every reason to believe the announcement will come during CEO Jensen Huang’s conference call, shortly after the closing bell today.

“By the time CNBC reports a buyout,” says James, “the real money has already been made. The biggest profits come before the headlines. That’s why this story is so urgent.”

Members of Altucher’s True Alpha are already clued in; indeed, many of them have already taken action. If you’re not among the ranks of True Alpha subscribers, there’s still a brief window this afternoon in which you can watch James make his case and act if you so choose.

Click here to start watching right away. You can always come back to the rest of these 5 Bullets later…

Bellwether

As goes Nvidia, so goes the market? Maybe…

“It’s fitting that NVDA is the last of the mega-caps to reveal its quarterly results,” says Paradigm chart hound Greg Guenthner.

“This earnings announcement also carries a little extra baggage right now due to the state of the market. With so many leading stocks getting punched in the mouth right now, NVDA has a chance to play hero and save the bulls from impending doom.

“To be clear, we expect NVDA to produce impressive numbers. There’s no indication that the artificial intelligence boom has subsided. The major players have yet to pull back on their spending. Frankly, I’d be shocked if NVDA came up short…

“But the numbers aren’t the issue. Assuming NVDA doesn’t reveal some sort of negative surprise, it’s all about the herd’s reaction.”

Reminder: While NVDA roared nearly 800% higher starting in late 2022, it’s been moving sideways since last fall — between $115–150, trading as we write this morning around $130.

“For the broader stock market, if the earnings report excites the Street and buyers step in and push NVDA back toward $150 and new highs, there’s a solid chance the move re-energizes the bulls and drags some of these flailing tech stocks out of the mud,” Greg says.

“A broad semiconductor breakout would soothe the bulls and give them a reason to rotate into these former market leaders.

“Regardless of what happens, I still think this earnings reaction is the most important event of the quarter. NVDA could play the role of market savior if everything turns out just right.”

Ahead of NVDA’s earnings release, all the major U.S. stock indexes are firmly in the green — the S&P 500 up nearly 1% and back above 6,000.

Gold slipped under $2,900 earlier today but at last check it’s recovered to $2,912. Silver is slightly in the green at $31.82.

Crude is flat after yesterday’s smackdown — a few pennies under $69. A barrel of West Texas Intermediate is now as cheap as it was at Christmastime.

No joy in crypto-land, either — Bitcoin’s a little over $86,000, basically back to a level where it sat a week after Election Day.

Trump’s Vietnam Moment: An Update

The details are still fuzzy… but it appears Donald Trump is failing the test of his “Vietnam moment.”

That’s the term Paradigm’s international economics pro Jim Rickards gave to the crossroads Trump faces with Ukraine.

Recall it was Democrat Lyndon Johnson who dramatically escalated Washington’s involvement in Vietnam — but it became Republican Richard Nixon’s war for five more years. “Wars that cannot be ended become all-consuming for presidents who fail to end them,” says Jim.

In this space on Feb. 13, Jim said Trump had three choices to deal with the war handed to him by Joe Biden…

1. “Basically, agree to Putin’s terms with some face-saving measures.
2. “Keep fighting, which will continue indefinitely and end in Ukraine’s collapse.
3. “Escalate, which will push the world closer to World War III.

“Choice 2,” Jim warned, “will soon convert the war from Biden’s war to Trump’s war.”

Which brings us to the minerals deal that Trump might sign Friday when Ukraine’s president Volodymyr Zelenskyy pays a call on the White House.

Ukrainian Prime Minister Denys Shmyhal says Kyiv and Washington have come to terms. An “investment fund” would be set up to rebuild Ukraine, paid for with 50% of the proceeds from Ukraine’s rare earth elements and other natural resources.

Trump won’t confirm a deal is done, and we still don’t know what percentage of the fund would be owned by the United States.

But he said several other revealing things in the Oval Office yesterday — especially that the deal would give Ukraine “the right to fight on.”

Really, now?

Asked whether that means Washington would continue to supply weapons for Ukraine to fight Russia, he said, "Maybe until we have a deal with Russia... We need to have a deal, otherwise it's going to continue."

Trump even boasted to assembled reporters that he sent Javelin missiles to Ukraine during his first term — a step Barack Obama hesitated to take.

So much for ending the war in 24 hours.

As independent political reporter Michael Tracey tweets, “It turns out the plan is to sign a long-term funding agreement with Ukraine, continue supply of U.S. weaponry and sign off on some hazily defined French and British ‘peacekeeping’ force -- meaning the deployment of NATO troops to Ukraine. Isn't that what Russia invaded in the first place to prevent?”

Indeed it was.

We’ll stay on top of the story because neither mainstream nor conservative media are getting it right.

For the time being, we give Jim Rickards the last word. As he said in this space 13 days ago: “Trump can’t afford to become consumed by Ukraine if he wants to achieve the rest of his agenda on trade, immigration and real growth.”

A Follow-Up… and a Flashback

For the record: Dockworkers on the East Coast and Gulf Coast have ratified a new six-year contract.

As you might recall, 45,000 workers from Maine to Texas staged a three-day strike last October. Leaders of the International Longshoremen’s Association called a halt to the strike when they came to terms with the U.S. Maritime Alliance on a pay package — but the two sides were still far apart on the issue of automation.

A second strike loomed last month, only five days before Trump’s inauguration. But the two sides hammered out a deal in early January. Now it’s official, with the union saying the contract met with 99% approval from the rank-and-file.

Per the FreightWaves site, “The pact allows terminal operators and ocean carriers to introduce limited automation equipment in container handling linked to guarantees that protect union jobs.”

Now for a brief perspective on how much the world has changed in the last decade…

“Finance ministers from many of the world’s largest economies are poised to skip G20 meetings in South Africa this week,” says the Financial Times — “underscoring the declining relevance of the body at a time when global cooperation is faltering.”

Treasury Secretary Scott Bessent is skipping the confab — and so are the finance ministers of China, India, Brazil and Mexico.

In 2015, our Jim Rickards described the G20 as “a de facto board of directors for world government.” Indeed the G20 was the forum for many important if little-publicized decisions made in the years following the global financial crisis in 2008.

But that was before major rifts emerged between Washington and Beijing during the late 2010s. Disagreements over the invasion of Ukraine in 2022 all but wrecked any remaining kumbaya spirit.

In 2023, Chinese President Xi Jinping skipped a gathering of G20 leaders — likely as a snub of Joe Biden. Russia’s Vladimir Putin was also a no-show.

Now the G-20 is all but irrelevant.

Which makes it all the more amusing that Federal Reserve Chair Jerome Powell will be in attendance this week…

Mailbag: Common Questions From Newer Readers

We got a lot of feedback yesterday to our inquiry about Chinese stocks.

But we’re going to wait till tomorrow to dive in because we have some customer service-type inquiries that take priority.

We pass them along on the theory that what’s on these readers’ minds might be on yours too…

“I understand or at least hope I got a good deal for $50 but I am already being asked multiple ways to upgrade,” a reader writes.

“I would at least like to get familiar with and see some real-time information before I will put down any more money. I would hope you would understand this as a business and allow new customers who may not have any experience in cryptocurrency or stocks to digest this information.”

A related inquiry: “Love James Altucher’s messages and program offerings even though sometimes he`s a little long winded getting to the point.

“What bothers me is that he forgets (or doesn’t realize) many of his listeners are on fixed incomes and just can`t afford the price of admission.

“We would love to buy the programs that would get us out of being stuck in a life of want. If someday you could devise a way one could buy some of your more expensive programs on payments you would be able to have a new group of very grateful investors.

“The saying goes don’t invest more than you can afford to lose. We say that one can`t afford not to be able to invest.”

Dave responds: Totally understandable.

We have the hope but not the expectation that when you sign up for one of our entry-level newsletters that you’ll decide to upgrade to one of the high-end trading services sooner or later.

Please understand our business model. We don’t kowtow to outside advertisers, and we certainly don’t accept payment from companies for us to tout their stocks. Almost all of our revenue comes from the subscription fees of readers like you.

Ideally, the money you make from the recommendations in a $50-a-year publication like Altucher’s Investment Network will make it possible to step up to a higher level of service.

Much more about our business model and our customer relations in this back issue that we revise and update from time to time — simply because these questions come up again and again from new readers.

“I signed up for a trading service, not a diatribe by someone who really sounds like someone with an axe to grind,” writes our final correspondent.

“Report on the markets, help me trade. I really don't need your personal opinions on people. I can form my own opinions.”

Dave: As we emphasize in that back issue I mentioned moments ago, these 5 Bullets are a free supplement to your paid publication. (It’s free, and you get what you pay for!)

Just guessing here, since you didn’t offer any specifics — you were somehow triggered by last Friday’s edition?

I’m sorry if you don’t care to look under the hood at the seamy intersection of business and government, commerce and politics — but often that’s what drives the movement of trillions of dollars across the country and around the world. Ignore it at your personal financial peril…

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets