The Nvidia Surge
Can this historic run continue even higher?
What we’re witnessing with Nvidia is one of the greatest runs a stock has ever seen. It just might end up being the best of all-time.
It seems like everyday it rises 2-3%. It kind of feels like this chart, where it may just go to the moon.
The surprise is that a stock of this size is making a run like this. This isn’t a penny or small-cap stock having this type of a run. It’s one of the largest companies in the world.
This week we saw it become the 4th most valuable company in the world passing Amazon and Google.
Just this year so far it’s up almost 50%! The 52-week low was $204.21. It’s now at $721.28.
This comes after it was the top performing stock in the S&P 500 in 2023 by returning 239%.
There is clearly a lot of hype surrounding Nvidia. It passed Amazon in market cap but when you compare Nvidia and Amazon you can see just how much of what’s being priced into Nvidia is the future AI growth. It’s a lot of hype to try and match.
Revenue/Market Cap
Amazon $575 billion/$1.804 trillion
Nvidia $45 billion/$1.827 trillion
When you look at a forward p/e basis you can see how Nvidia is in a good spot on a valuation basis against its closest competitors.
Forward P/E
Nvidia 35.71
Intel 31.75
ARM 106.38
AMD 51.28
Wall Street analysts just continue to hike their price targets to keep up. The new high price target this week is $920. That will likely be topped by another institution by the time you read this.
Of the 64 research institutions, 58 have a “buy” on the stock. There have been zero sell notes in nine months.
So what’s next?
Nvidia reports earnings on February 21st. How those earnings are and what is said will be watched closely by Wall Street. Everyone used to watch Apple and say that Apple led the direction of the market. That is now Nvidia.
You don’t have to look very hard to find people talking about the bear case with Nvidia.
Supply is coming back online. Competition will eventually come. But I’ve heard this now for over a year and it hasn’t yet.
Nvidia recently switched their entire chip assembly to Taiwan Semi (TSMC). They will now be making all their chips. That creates risk with their reliance on Taiwan and the continued tensions about whether China decides to invade Taiwan or not.
This is why the US is onshoring semiconductor production. Nvidia has an Arizona plant coming but it will not be up and running for roughly another four years. Can China, Taiwan and the US all get along for four more years?
Global semiconductor inventory looks to be chainging. From JPM, "Inventory levels remain extreme, and we could see some destocking over the coming quarters, putting pressure on demand. This is likely to translate to weaker pricing and margins for the sector."
Then there is the reliance Nvidia has on a few select companies. The top four companies account for 40% of Nvidia’s revenues and they all are working on developing their own custom AI units.
The above chart appeared in an article that just came out in the FT called Sell Nvidia. I found the article to be interesting but nothing in there hasn’t already been known while this stock has continued to climb higher.
You can watch TV and every “expert” has a different opinion on it. Everything from “it’s still cheap” to “it’s going to crash” and everything in between.
I’ve been asked what my opinion is because I have been mostly right on the stock so far.
I first started my position in Nvidia in January of 2022. Then I continued to buy all the way down to $138 a share on September 1, 2022. Since that point it is up 428.53%.
Then I made it my top stock pick last year. Investing Update: 3 Stocks For 2023. I wrote a post on 5/31/2023 called My Nvidia Plan Moving Forward where I shared what I was doing at that time. Here we are nine months later and I’ve yet to sell a single share. It’s now grown to be my largest holding.
I may be getting a little greedy but in my opinion other than the price appreciating so much, I don’t have reason enough to even trim my position. I look back at what I’ve done with my other early big stock winners as an early investor in Apple and Amazon. Those positions I also didn’t sell off. I still own them today.
You can scour the internet for both bullish and bearish content on Nvidia. Just as you can with any stock. The bottom line is Nvidia has been crushing it with results for some time now. Yes, the euphoria around AI may be overblown. But what if it isn’t? If Nvidia continues to produce and reward investors this run can very well continue.
Have your own conviction and come to your own conclusions when you’re an investor and own stocks. Make your own decisions and don’t base them off what people on TV or so called “experts” say you should do. It’s your money and your decisions.
The Coffee Table ☕
I’ve said the Wisconsin restaurant and food scene has been underrated and overlooked. That’s about to change! The location of Top Chef Season 21 is Wisconsin. With my wife and I being big foodies, this has long been one of our favorite shows to watch. We can’t wait to watch this and see which places around the state they feature in the show! It premiers March 20th.
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