DraftKings & AI Stock Discussion

DraftKings' Market Position and AI Stock Rally

Adam Johnson, portfolio manager at Bullseye American Ingenuity Fund, recently discussed DraftKings and the AI stock rally with Myles Udland on Market Domination. Johnson highlighted DraftKings' significant market presence despite a 25% stock drop, attributing the decline to broader market volatility rather than company-specific issues.

DraftKings, trading at 19 times earnings with a 75% growth rate, is positioned as a leader in the betting industry. Johnson emphasized the company's new deal with NBC Universal, which will co-brand DraftKings with NBC sports platforms for several years. This partnership is expected to solidify DraftKings as the most recognizable betting platform, further strengthening its business growth.

Competition in Prediction Markets

Johnson addressed concerns about DraftKings' approach to prediction markets, particularly after Robinhood announced its entry into sports-based prediction markets. While Robinhood's one-stop platform for crypto, stocks, and betting poses a potential threat, Johnson believes in best-in-breed companies. He views DraftKings as the leader in its sector, similar to Salesforce in CRM and Nvidia in chips.

Despite competition, Johnson prefers owning the top company in an industry, emphasizing DraftKings' dominant position in the betting market. He noted that DraftKings' focus on its core business and strategic partnerships, like the NBC deal, will help it maintain its leadership.

AI Stock Rally and Key Players

The conversation shifted to the AI stock rally, with Johnson discussing CoreWeave and Applied Digital. CoreWeave, which rents AI capabilities as a cloud platform, saw its stock rise significantly after its IPO earlier this year. Johnson finds CoreWeave appealing around $130-$140, highlighting its custom AI solutions for businesses.

Applied Digital, a partner of CoreWeave, has seen its stock almost triple in the last six weeks. The company builds and operates data centers, partnering with CoreWeave for revenue upside. Nvidia, which partially owns Applied Digital, is a key player in the AI ecosystem, providing chips essential for AI operations.

Johnson addressed concerns about the 'cabal' of AI companies, including Nvidia and its partners. He views this ecosystem as necessary, as every company is becoming an AI company. These AI-related firms are profitable and growing, unlike many companies during the dot-com era.

Despite its growth, Johnson believes Nvidia is still undervalued, trading under 30 times earnings with substantial growth potential. He emphasized that AI companies like CoreWeave, Applied Digital, and Nvidia are well-positioned for future success in the expanding AI market.