VRA Investment Letter: “Buy the Dip” in this Young Bull Market. Front-running of March/April Underway. NVDA's "Stunningly Great" Earnings.
/Good Thursday morning.
For our newer VRA readers, welcome….it’s great having you with us. We encourage you to stay locked in over the months and years to come, as we continue on our mission to “Crush Mr. Market”. Since our founding in 2003, we’ve outperformed the market 19/22 years and from the end of the bear market (10/13/22)…which we’re proud to have called to the day…we’ve put up a 3-year average return of 37.7%. We’ve been the biggest bulls in America from the October 2022 lows and we continue to forecast that we’ve entered a generational bull market…a bull market that will carry into the 2030’s. This is dot-com on steroids. Remember, during the dot-com melt-up Nasdaq soared 575%. To date, in this bull market, Nasdaq has risen just 126%. Yes, we are that early.
Over the last several weeks/months…frankly from the birth of this bull market on 10/13/22…our markets have demonstrated remarkable strength (outside of the 5 week tariff mania) based on it’s continued rotational strength…moving from sector to sector, without money actually leaving the market. Remember, this is textbook bull market action.
To make the point of a “rotational bull market” even more clear, take a look at the corrections in Mag 7 stocks from their highs of last year:
Microsoft: -28% (Bear Market)
Amazon: -21% (Bear Market)
Meta: -19%
Tesla: -17%
Google: -13%
Nvidia: -12%
Apple: -9%
The 7 stocks above make up 33% of the entire S&P 500, yet the S&P 500 is down less than 2% from its highs. Folks, this is one strong bull market.
We look for front-running into two of the best months of the year to now be underway, as investors rush back into US tech/momentum stocks in what will be a continuation of this textbook rotational bull market. In addition to solid trading action on Tuesday and Wednesday, yesterday we got a stunningly good Nvida (NVDA) earnings report. Bears could hardly be more wrong on this VRA 10-bagger.
NVDA’s numbers are hard to believe. $68.1 billion in revenue in Q4 alone, with gross margins of an almost unheard of 75.2%. To put this in perspective, just 4 years ago Nvidia’s total annual revenues came in at just $16.7 billion. One of the most interesting and underreported parts of this story is their cash flow and capital structure. NVDA has virtually no debt, $62 billion in cash and are now generating $200 billion in free cash flow per year.
This astonishing level of cash flow is also enabling lots of share buybacks: Nvidia has returned $41.1 billion to shareholders over the last year (43% of free cash flow) and still have $58.5 billion left to be bought back over the course of 2026 (already authorized). This free cash flow machine will almost certainly fund far more buybacks going forward.
As to the earnings call, CEO Jensen Huang (who founded NVDA in 1993), he spent much of the call talking about their growth in networking and what looks to be his real passion, agentic AI.
In agentic AI...autonomous AI systems that reason, plan, use tools, make decisions, and handle multi-step tasks (like researching, coding, or automating workflows)...tokens play a massive role. These agents run in loops (they generate long chains of reasoning) which creates far more tokens than simple chat. Huang highlighted this, saying "agentic AI has hit an inflection point, where inference tokens are now profitable for customers" (driving real revenue, like better ad performance, automation gains, etc).
More tokens = more compute needed. Huang’s key line: “In this new world of AI, compute equals revenues. Without compute, there’s no way to generate tokens. Without tokens, there’s no way to grow revenues.” That’s why hyperscalers are pouring billions into Nvidia GPUs; to crank out tokens at scale, fueling the agentic boom and turning AI infrastructure into a direct revenue engine.
VRA Bottom line: This US-dominated AI infrastructure buildout will continue to drive productivity surges, with new industries and multi-trillion-dollar value creations, setting up years of soaring US GDP and bull market rallies (led by semis/tech). NVDA's financial fortress; a pristine balance sheet, explosive cash generation, and runway for massive returns will continue to surge. Folks, we’re entering the boom phase of AI. Ignore what the bears are telling you…we’re in just the first/second inning of the Innovation Revolution. By 2030, when the markets have doubled from here, the shorts may finally come to understand what’s actually happening here. We see a measured move in NVDA this year that will take the stock past $325. Last: $197.
Trading Note: Extreme Fear in Nasdaq
The Nasdaq 100's put/call ratio just hit 1.2, the highest reading since the 2022 bear market lows. This exceeds the April 2025 tariff mania spike and any other reading over the last 12 years (excluding 2022 when the ratio reached 2.3). This is a contrarian buy signal. We look for tech to rally sharply from here.
SOTU
I’m a lifelong Independent, voting for both Dems and Republicans from my first vote in 1980. I’m proud of that. But folks, as we witnessed again last night, this Democrat Party has become entirely unrecognizable. The left’s child-like refusal to stand for Americas achievements, and more importantly our own home-grown heroes, was downright embarrassing. Last night was a stark display of partisanship over patriotism and love vs hate of America and Americans. Trump effectively united the right and exposed the lefts divisiveness. If the SAVE Act is passed…which is looking more and more likely (83% of Americans support it)…it would put a dagger in the heart of the attempts to transform America into a communist nation.
This may have been the best SOTU I’ve seen. When Trump looked every member of Congress in the eye and said: “Tonight I’m inviting every legislator to join with my administration and reaffirm a fundamental principle. If you agree with this statement, stand up and show your support: the first duty of the American government is to protect American citizens, not illegal aliens.”
This was a masterclass moment from Trump. Democrats stayed glued to their seats. Not one stood. Not one clapped. Not one had the guts to publicly choose Americans first. Trump followed up with “these people are crazy!”, a statement I’ve heard many times from you, and in my own household, often over the last several years.
VRA Bottom Line: last night is how you win the midterms. Compare and contrast the two parties. Now, the SAVE Act MUST be passed….if not, Republicans deserve to lose in the midterms.
Finally, thanks to Grant Stinchfield of Real Americas Voice for having me on last night to talk about the markets and VRA.
https://x.com/KHerriage/status/2026114583157408171
Until next time, thanks again for reading.
Kip
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