Bunching w/ Stocks + Thoughts on Nvidia

Happy Monday!

I hope you enjoy this edition of The Change-up, my weekly newsletter sharing the latest market news and personal finance tips. If you're interested in learning more about working with me, send me a message or click my Calendly link at the bottom.

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Quote of the Week

"Failure is only the opportunity to begin again, this time more intelligently"?- Henry Ford

Song of the Week

The Story

Stocks continued their hot streak last week, getting a strong boost from Nvidia. All indexes are positive for the year and the market continues to reach new heights. The S&P 500 is now up over 20% since the end of October. But let's get back to the story of the week/year/decade.?

My View

Nvidia was started in 1993, mainly creating chips for video game consoles before shifting into other markets during the 2000s, including creating a simulation of Mars for NASA and graphics chips for Audi.?

Over the last 15 years, Nvidia has shifted to creating Graphics Processing Units (GPUs) based on parallel computing. This allowed the company to land major contracts with car makers and smartphone makers but also opened the door to creating chips for Artificial intelligence.?

Here's why that is important.

Nvidia had a market cap, or value, of around $300 million in 2020. The company just passed $2 trillion in market cap, making it the third most valuable company in the world behind Apple and Microsoft. The stock is up 17,000% over the last 10 years and is already up over 60% YTD. The company is dominating the AI chip marketplace, holding 80% of the contracts from large AI players. Nvidia announced over $20 billion in revenue during Q4 of 2023, more than 3 times what it did the year before. It's reached Taylor Swift status in the investing world.?

I bring up Nvidia for two reasons:

1. The company is driving a lot of the success the market is experiencing. The company's size is larger than South Korea's entire GDP! Because the S&P 500 is market cap weighted, Nvidia, Apple, and Microsoft have an outsized influence on how the index is performing.

2. The company has been a rocket ship over the last four years. And while it's tempting to allocate a significant investment towards Nvidia to join the party, history should give us pause. Consider Cisco in the late 90s. Cisco provided infrastructure that helped connect companies and consumers to the internet. Nvidia provides infrastructure that powers artificial intelligence. Cisco's stock was also a rocket ship during the tech bubble but came back to earth once the pandamonium around the internet died down.?

Now, hear me when I say that I'm not expecting or predicting Nvidia to follow a similar track as Cisco. There's no way to know how Nvidia will perform over the next 5-10 years. I just bring it up as a word of caution.?

As always, stay diversified and invest in durable businesses with growth opportunities. Just because something is flying today doesn't mean it will fly tomorrow.?

Coming Up This Week

• Earnings Season (All Week)
• Q4 GDP (Wednesday)

Last week, I talked about giving appreciated securities to 501(c)(3) organizations (nonprofits) instead of cash. If you missed it, catch up here.?

But what if you could maximize your tax savings even more?

Enter bunching.

Over 85% of Americans claim the standard deduction on their tax return. Meaning, that all charitable gifts are irrelevant from a tax standpoint.?

But bunching gifts potentially allows you to itemize on your tax return, giving you extra savings.

Here's an example:

We have a married couple, let's call them Travis and Taylor Kelsey. They give $20k/year to their favorite non-profits. Since the standard deduction is around $30k, they don't itemize deductions.

But what if they gave two years' worth of gifts in one year? They could take a $40k deduction in the year of two gifts and the standard deduction in the other year. That's an extra $10k deduction for giving the same amount!

But wait, there's more!

If they give appreciated stock instead of cash, they can save on capital gains tax in addition to the extra $10k deduction. That ends up being a lot of money saved for giving the same amount to the nonprofit.

If you're giving charitably, reach out. Chances are we can be strategic about your giving and save some on taxes.?

Let's have a great week!

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