Why Munro Partners’ Nick Griffin is bullish on Nvidia

Nick Griffin caught the investment bug at age 15, when his father, an equity fund manager, encouraged him to buy stock in firms being privatized by Australia’s government in the 1990s. He profited from owning Commonwealth Bank, Telstra and Qantas Airways, and later waded into buying miners, contractors and retailers. After earning a commerce degree, he entered the financial world as a commodity analyst before backpacking around the world. He wound up in Edinburgh, where he worked as an oil and gas analyst before returning to Australia to run a global equity fund for K2 Asset Management. In 2016, he co-founded Munro Partners, which runs $5.2 billion in assets for CI Global Asset Management. It includes CI Munro Global Growth Equity Fund, which has outpaced the MSCI All County World Total Return Index in Canadian dollars since 2020. We asked Griffin why he’s bullish on AI and a fan of Nvidia.

What’s your strategy to pick winners?

We try to identify the world’s big structural trends early to find companies that can grow their earnings over time and, ultimately, their share price. For example, Visa and Mastercard benefited from the shift to credit cards, Apple to the smartphone, Amazon to online retailing, Nvidia to high-performance computing and Eli Lilly to GLP-1 drugs. It’s a game of few winners, so we have a stop-loss process to review our investment case to see if we’ve made a mistake. It was obvious smartphones would be big, but we didn’t know who would win. We bought Apple, BlackBerry and HTC, but eventually sold the latter two to make a bigger bet on Apple.

Artificial intelligence is a key structural growth trend. Why are you bullish despite skeptics?

AI use is exploding. It’s compute-intensive technology. We see a lot of demand but not enough supply, so we think the data centre build-out will continue for a long time. Revenue is flowing to firms enabling the build-out, such as semiconductor companies, power, heating and cooling, and construction companies. They are the shovels of the AI boom. Cloud service providers are now getting good returns, while players like KKR, Blackstone and Apollo Global Management are helping finance the build-out. We are three years into AI adoption and expect it to go on for 20 years.

Why do you like Nvidia, whose stock has faced some wild swings?

We’ve owned the chipmaker since 2018. It’s part of the AI structural trend and has been a great performer. We have faith in chief executive Jensen Huang’s ability to see where this industry is going. When Nvidia says its revenue will grow by at least 70% in its next fiscal year, the market struggles to believe it. We think it can grow its earnings by 70% next year, too. If the data centre build-out continues, so will its earnings growth. Nvidia is like the Apple of this opportunity and is about five years into that journey.

Why is travel a structural theme?

Air travel has grown at double the rate of global GDP for decades because it’s getting cheaper and more accessible. But Airbus and Boeing can’t build planes fast enough. Airlines need to keep planes for longer, so we invest in jet engine makers that get most profits from spare parts and services. It’s an oligopolistic industry with strong growth rates. We own Howmet Aerospace, GE Aerospace and Rolls-Royce Holdings.

You acquired a small position in Elon Musk’s SpaceX at its IPO. Why?

We bought SpaceX for the CI Munro Alternative Global Growth Fund but sold it at over US$200 a share when it hit our target. We expect its stock to do nothing for a year or two before emerging potentially as a winner. It now sends satellites into orbit and can potentially do the same with AI data centres. If its Starship launch vehicle becomes truly reusable, SpaceX will become very interesting. It also operates the Grok large language models. We don’t know which frontier AI lab will be the winner, but SpaceX now has a chip in that game. /Shirley Won