DraftKings & AI Stock Discussion
Source: finance.yahoo.com
DraftKings' Market Position
Adam Johnson of Bullseye American Ingenuity Fund discussed trending tickers, including DraftKings, with Market Domination host Myles Udland. Johnson noted DraftKings' stock is down approximately 25% in recent weeks, calling the drop "crazy" because it trades at 19 times earnings, cheaper than the S&P 500, yet its earnings are growing at 75%.
Johnson mentioned the new deal with NBC Universal, where DraftKings will be co-branded with NBC sports across platforms for several years. This should solidify DraftKings as the most recognizable betting platform and strengthen its already growing business.
Competition in Prediction Markets
Johnson addressed concerns about DraftKings not being aggressive enough in the prediction market space, especially after Robinhood's announcement of offering sports-based prediction markets within their app. He believes the appeal of Robinhood is that it’s a one-stop shop to buy crypto, stocks, bonds, and make bets, possibly impacting DraftKings.
Despite this, Johnson is a believer in best-in-breed companies and sees DraftKings as the leader in its sector, similar to how Salesforce.com leads in customer relationship management and Nvidia in chips. He prefers owning the top company in a specific industry.
AI Stock Rally
The conversation shifted to the AI trade, highlighting CoreWeave. Johnson mentioned CoreWeave's IPO earlier this year, noting its initial run-up and subsequent pullback. He found it appealing around $70 or $80, and it's now around $130-$140. CoreWeave rents AI capability as a platform in the cloud, providing custom solutions for businesses needing AI.
Applied Digital, another company mentioned, partners with CoreWeave by building and operating data centers, with CoreWeave renting space or partnering for revenue upside. Johnson noted that Applied Digital's stock has almost tripled in the last six weeks and is expanding capacity significantly. Nvidia partially owns Applied Digital.
Johnson addressed concerns about the "cabal" of companies like Nvidia, its partners, and consumers of its chips. He believes it's a necessary ecosystem as every company becomes an AI company, and these companies are profitable.
He feels Nvidia is still undervalued, once trading under 30 times earnings with substantial growth. He emphasized that these AI-related companies are currently profitable and growing, unlike the dot-com era companies.