Nvidia - How high is too high?
Nvidia (NVDA) continues to defy gravity, hitting $140 in pre-market trading today.
This translates to:
A 23% increase in June alone
A 55% increase in Q2
A staggering 184% increase since the beginning of the year
A 225% year-to-date (YTD) surge
These are the kinds of figures we've come to expect from Nvidia, making even impressive YTD gains of 27% by companies like Microsoft look pedestrian. Nvidia's rise has also propelled it to the top of the market cap rankings, becoming the world's most valuable publicly traded company.
The Question of Sustainability
The burning question is, can this growth be sustained?
So far, Nvidia has the numbers to back it up. The company has already generated more EBITDA this year than in all of FY2023. While its Price/Earnings Growth (PEG) ratio of 1.55 suggests a slight overvaluation, and has been increasing steadily for a year, it remains below the PEG ratios of multi-trillion-dollar peers like Microsoft and Apple.
Technical Indicators Flashing Green
The technical indicators also paint a bullish picture. The stock is well above its short-, mid-, and long-term moving averages, indicating strong momentum. The recent surge in volume further confirms heightened investor interest.
The Bias and Sentiment Strength (BASS) Indicator, a composite tool created by mattzab combining several technical indicators, also flashes a strong buy signal for Nvidia. (For a detailed explanation, see this page: https://www.tradingview.com/script/MEKxYFt0-Bias-And-Sentiment-Strength-BASS-Indicator-by-mattzab/).
The Road Ahead: Smooth Sailing or Bumpy Ride?
The big question is whether we'll see a soft landing, a minor pullback, or a significant dip. This will depend on how many investors decide to take profits and the speed at which they do so. A rapid sell-off would likely be triggered by a sudden collapse in the "AI hype" or if companies find themselves unable to effectively utilize their new AI chips, or their efforts to capitalize on LLMs fail.
It's still early days in the AI boom, but parallels have already been drawn with the dot-com bubble which many investors are old enough to remember. It took Apple more than 5 years after the crash to reach its dot-com peak, and Microsoft needed more than 14 years. While there is no looking back for these stocks now, one shouldn't forget that Cisco, which was regarded as a crucial internet infrastructure provider at the turn of the century, never reached its dotcom peak again. But then again, past market crashes do not guarantee future losses, or how did the saying go again?
For now, the status quo remains: everyone is bullish as long as everyone else is bullish as well.
As always, stay vigilant out there!
This translates to:
A 23% increase in June alone
A 55% increase in Q2
A staggering 184% increase since the beginning of the year
A 225% year-to-date (YTD) surge
These are the kinds of figures we've come to expect from Nvidia, making even impressive YTD gains of 27% by companies like Microsoft look pedestrian. Nvidia's rise has also propelled it to the top of the market cap rankings, becoming the world's most valuable publicly traded company.
The Question of Sustainability
The burning question is, can this growth be sustained?
So far, Nvidia has the numbers to back it up. The company has already generated more EBITDA this year than in all of FY2023. While its Price/Earnings Growth (PEG) ratio of 1.55 suggests a slight overvaluation, and has been increasing steadily for a year, it remains below the PEG ratios of multi-trillion-dollar peers like Microsoft and Apple.
Technical Indicators Flashing Green
The technical indicators also paint a bullish picture. The stock is well above its short-, mid-, and long-term moving averages, indicating strong momentum. The recent surge in volume further confirms heightened investor interest.
The Bias and Sentiment Strength (BASS) Indicator, a composite tool created by mattzab combining several technical indicators, also flashes a strong buy signal for Nvidia. (For a detailed explanation, see this page: https://www.tradingview.com/script/MEKxYFt0-Bias-And-Sentiment-Strength-BASS-Indicator-by-mattzab/).
The Road Ahead: Smooth Sailing or Bumpy Ride?
The big question is whether we'll see a soft landing, a minor pullback, or a significant dip. This will depend on how many investors decide to take profits and the speed at which they do so. A rapid sell-off would likely be triggered by a sudden collapse in the "AI hype" or if companies find themselves unable to effectively utilize their new AI chips, or their efforts to capitalize on LLMs fail.
It's still early days in the AI boom, but parallels have already been drawn with the dot-com bubble which many investors are old enough to remember. It took Apple more than 5 years after the crash to reach its dot-com peak, and Microsoft needed more than 14 years. While there is no looking back for these stocks now, one shouldn't forget that Cisco, which was regarded as a crucial internet infrastructure provider at the turn of the century, never reached its dotcom peak again. But then again, past market crashes do not guarantee future losses, or how did the saying go again?
For now, the status quo remains: everyone is bullish as long as everyone else is bullish as well.
As always, stay vigilant out there!
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