British chip design company Arm debuted on the Nasdaq on Thursday and is now trading at a premium to even fellow semiconductor company Nvidia. Nvidia’s stock price has already more than tripled this year – easily higher than any other stock in the S&P 500. But Arm’s price-to-earnings ratio is now nearly 170 times – surpassing that of Nvidia, which develops graphics processing units for high-end , artificial intelligence processes. But hedge fund manager Dan Niles told CNBC’s “Squawk Box Asia” that he would “much rather own Nvidia” for the AI play. He pointed out that 75% of Nvidia’s revenues are data center-driven, while less than 15% of Arm’s revenues are generated by AI. He added that Arm’s 10% revenue growth, which is expected to accelerate, is well below Nvidia’s forecast of 170% growth in the current quarter. “So that’s why I have an issue with buying Arm here in terms of risk versus reward,” said Niles, who manages the Satori Fund. Nvidia is also down more than 7% so far in September, and Niles describes that as a “very healthy consolidation.” “The cool thing is, for investors who felt like they missed out before, you can now buy it at 31 times for PE, which is down from about 50 before, because the numbers jumped so much after they reported ,” he said. . “So I think if you’re thinking about investing in AI, you should really start with Nvidia because it’s not that expensive when you look at it relative to the growth rate.” He also advised investors to tap into the AI theme with other names. Its top AI players, which he said are “growing revenues very nicely,” are Alphabet, Meta, Amazon and Intel. While Meta uses AI to place ads and make recommendations, Intel is an AI play in terms of being a foundry for AI companies, he said. “These are all names you can buy at much better valuations than Arm and I’m not saying Arm isn’t a great company,” Niles said. “They’re an absolutely fantastic company. They just don’t have a fantastic price. And that’s the crucial difference.”
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