As Nvidia Corp. faced a significant selloff earlier this year, Impax Asset Management took the opportunity to acquire a stake in the company that its executives had long regretted missing. Ian Simm, CEO and founder of the London-based asset manager with $50 billion in assets, noted that he and his team recognized their previous miscalculation regarding Nvidia’s market potential, which resulted in them missing out on the company’s remarkable 800% rally since the start of 2023.
“We underestimated the market potential of their product,” Simm said in an interview, explaining that while Impax had been looking for an entry point into Nvidia, the stock had previously seemed “expensive.” However, the recent selloff created a more favorable buying opportunity.
Nvidia’s share price decline earlier this year led to a staggering peak-to-trough drop in its market capitalization of nearly $1 trillion. Although much of this value has since been regained, Simm believes Nvidia’s current valuation of over $3.2 trillion does not accurately reflect its true worth.
Founded in 1998, Impax has built a reputation as a leading asset manager dedicated to fostering a transition toward a sustainable economy. Simm maintains that this focus on sustainability can align with delivering returns for investors, although it has been challenging recently.
In recent years, rising interest rates, an energy crisis, and the rise of the so-called “Magnificent Seven” technology giants have made green investing a less favorable proposition. Impax’s stock price has declined nearly 30% this year, while the S&P Global Clean Energy Index has dropped more than 10%. In contrast, the S&P 500 has risen over 20% during the same period.
Earlier this week, Impax reported gains in listed equities amounting to £5.3 billion ($6.9 billion) for the fiscal year ending September 30. Nonetheless, this gain was overshadowed by £5.8 billion in net outflows experienced during the same timeframe.
Reflecting on past performance, Simm indicated that Impax is pivoting its focus towards larger technology firms in search of undervalued investments that could yield higher returns. “We’ve underperformed in our primary strategies in recent years because we were cautious, opting for growth-at-a-reasonable-price, and avoiding the momentum surrounding mega-cap tech,” he explained.
In June, as Nvidia’s share price was declining, Impax strategically tripled its investment in the company, increasing its stake from 1.4 million shares at the end of the first quarter to 4.9 million shares by the end of June, according to data compiled by Bloomberg and confirmed by Impax.
Simm continues to view Nvidia as undervalued, especially in light of the anticipated surge in demand for its chips driven by the growth of artificial intelligence. He argues that investing in Nvidia, which, like many tech companies, consumes significant energy to support its expansion, makes sense from an environmental standpoint. As energy demand rises, Nvidia and other companies that prioritize efficiency will contribute positively to climate goals.
Nvidia’s upcoming Blackwell chips, which are set to roll out this year, reportedly require 3 gigawatts of power to develop OpenAI’s GPT-4 software, a notable decrease from the 5,500 gigawatts required a decade ago.
“Nvidia’s capacity to generate energy savings enhances its value proposition,” Simm stated.
Impax includes Nvidia in five of its investment strategies and funds, including its Global Opportunities portfolio, which comprises 40 stocks from companies that maintain diversified business models, operate in high-growth markets, and may be undervalued for various reasons. For example, Microsoft Corp. is part of the portfolio due to Impax’s belief that it is undervalued in the context of the ongoing AI trend.
Simm also noted that “the entire industrial sector” appears undervalued. This perception may shift as a “soft landing in the U.S.” becomes increasingly plausible, restoring investor confidence. With capital costs decreasing and consumer sentiment stabilizing, equities are beginning to look more appealing, he concluded.
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