Peter Armitage, CEO of Anchor Capital
Buy: Nvidia
The global technology giants are engaged in an unprecedented arms race, collectively deploying an estimated $650bn in capital expenditure to build the infrastructure for AI. The clearest beneficiary of this extraordinary investment cycle is Nvidia. With roughly 90% market share in high-performance GPUs — the critical engines powering AI workloads — Nvidia sits at the centre of the data centre build-out.
Its latest results underscore the strength of this position. Earnings per share doubled year on year, and the company is now generating close to $200bn in annualised operating profit. A gross margin of about 75% and operating margins exceeding 60% reflect a business with rare pricing power and technological leadership.
Importantly, Nvidia remains asset-light relative to the spending boom it enables. While customers commit hundreds of billions to capex, Nvidia’s own capex is only about $10bn, with most manufacturing outsourced to the Taiwan Semiconductor Manufacturing Company. With profits likely to continue compounding and the share trading on roughly 25 times earnings, Nvidia offers exposure to the AI revolution at a valuation that remains surprisingly reasonable.
Sell: Meta
Meta, owner of Facebook, Instagram and WhatsApp, was once the archetype of a capital-light, high free-cash-flow technology franchise. Its advertising dominance translated into extraordinary profitability with modest reinvestment needs. That era appears to be ending.
The company is now committing to one of the largest AI-driven capex programmes in corporate history. With operating profits of about $90bn, Meta is spending more than $150bn on capex and is increasingly turning to debt markets to fund its ambitions. It is effectively wagering its future on owning vast computing capacity.
The strategic question is whether incremental returns justify this sustained investment. Online advertising is already highly penetrated, and Meta’s market share is enormous. The addressable market may not be deep enough to generate attractive returns on such heavy capital deployment.
In contrast to Nvidia — the prime beneficiary of the AI arms race — Meta is one of its largest financiers. That asymmetry makes the risk-reward less compelling.
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