2.5 year follow-up on buying the dip on pandemic stocks

I bought the dip on several ‘pandemic stocks’ that had significant declines (70%+) in 2022 and started sharing public updates 1-2 times a year.

In Q3 2023 I began reallocating into AI-related stocks when I developed strong conviction. I’m also working on a self-funded AI startup, which keeps me in the loop.

Returns have been strong and continue to give me the runway to work on my startup and support my family after leaving my corporate tech job. There’s more context in my previous updates linked below.

Previous updates:

Progress updates

Below are returns for this portfolio (opened in 2022) as of December 2024.

Realized (sold) in 2023

Affirm (AFRM): +18.09%
Allbirds (BIRD): +6.89%
Coinbase (COIN): +6.42%
Carvana (CVNA): +845.57%
Meta (META): +256.36%
Cloudflare (NET): +50.67%
Netflix (NFLX): +122.39%
Peloton (PTON): -71.51%
Roblox (RBLX): +25.57%
Shopify (SHOP): +51.27%
Snapchat (SNAP): -1.99%
Unity (U): +27.57%

See the previous update for comments.

Realized (sold) in 2024

Advanced Micro Devices (AMD): -18.69% (*)
Amazon (AMZN): +97.41%
Alphabet/Google (GOOGL): +75.05%
Apple (AAPL): +8.77% (*)
ARM (ARM): +10.52% (*)
ASML (ASML): -7.40% (*)
Intel (INTC): -20.12% (*)
Microsoft (MSFT): +4.53% (*)
Netflix (NFLX): +361.74%
Palantir (PLTR): +65.72% (*)
Roblox (RBLX): +42.66%
Shopify (SHOP): +86.96%
Snowflake (SNOW): +51.57%
Super Micro Computer (SMCI): +14.48% (*)
Taiwan Semiconductor (TSM): +103.19%
Tesla (TSLA): +92.16% (*)
Unity (U): -8.73%

(*) Short term capital gain/loss held for <1yr

I held several companies (*) for a short time to spread out my AI bets, but some of the increasingly high P/E ratios concerned me (PLTR, TSLA, etc.).

So, I sold them and purchased more Nvidia. This approach is considered risky, but I have strong conviction in their relative valuation, defensibility, and long-term prospects.

In this case I believe that ‘diversification’ among AI stocks would do more to dilute my returns than mitigate my risks. Particularly because they’re all highly correlated and despite its market cap, Nvidia has the most reasonable valuation all things considered. We’ll see if the bet pays off.

To clarify, I am confident in the long-term prospects of Palantir, Tesla, and others, but I’m just not comfortable with the valuations. I may reassess in the future when I have new information or valuations change.

Meta is the only other stock I held onto, given my bullish view on their AI and hardware strategy combined with their attractive valuation.

Unrealized (current investments)

Meta (META):+367.97%
Nvidia (NVDA): +117.05%

Nvidia’s performance here is understated since I recently increased my holdings, but it’s up ~200% since I initially purchased it last year after dithering for months.

These returns are less impactful without the values or relative weights, but I’d like to maintain some anonymity around it.

Rate of return (IRR)

My annual return for this portfolio (Jun 2022 to Dec 2024) is 73.6%.

Investment thesis

See a summary of my investment thesis in my previous updates. TL;DR:

“…AI is another secular trend like PCs (Windows, Mac), the internet (browsers, search, social) and mobile (iOS, Android, wearables). The difference is that new technology like AI can now spread faster than ever before and get used in new ways. Every new epoch uniquely benefits from the past, potentially bending the growth curve in new ways.
The other difference is that Nvidia has a monopoly position on the core technology driving this innovation. Therefore, the ~350% run up over the last 12 months doesn’t make Nvidia the stock of the last year, but rather it’s the stock of the next decade. The recent 3X gain will be a blip compared to what’s coming thanks to Nvidia’s CUDA (moat), among other things.”
1.5 year follow-up on buying the dip on pandemic stocks – Nov. 2023

Nvidia’s dominance

I’m still working through my thoughts here, but my strong conviction around Nvidia comes in part from these observations:

Nvidia is founder-led and focuses on accelerated computing while remaining broad enough to allow for innovation and insight across industries where it can apply its core competencies.
It’s unprecedented to have such dominance in such a fast-growing, valuable industry while maintaining such a long-term sustainable advantage.
This advantage is due to unreasonable investments (research, hardware, software, ecosystem, relationships) over decades, making it hard to copy.
AI will consistently make software easier to create, thus reducing the moats of software companies and make them less attractive than hardware companies (for now).
Despite their impressive growth, Nvidia is still supply constrained, which is fundamentally easier to predict than demand constraints.

We still underestimate the AI opportunity

Most importantly, we’ve barely scratched the surface of AI’s opportunities and benefits. Even the most ambitious targets underestimate it because the better and cheaper AI gets, the more use cases we’ll find.

We have a habit of confusing the limits of our imagination with the limits of reality. Our imaginations are trained on what happened before, but there has never been anything like this before.

Past thoughts on AI

Final thoughts

I’m still well within the ‘maybe I’m just lucky‘ phase since it’s only been a couple years. In the last update I also shared a few ways my investment approach has changed, which I’m still benefiting from.

I expect my next update to be the 3-year update in mid 2025.

All posts from this series: