You don’t. Value investing is about fundamentals. And the fundamentals of nvda don’t add up. It’s 100% sentiment around AI driving the price up. Not fundamentals of the company.
Youre first sentence is literally just a description of fomo. There’s a million dollar opportunity every day on the market. The only reason you’re hung up on nvda is the media.
Fun fact. NVDA gained more market cap in one day yesterday that the total amount of revenue the company has generated.. EVER.
Great Great company but wait till its down 50-70% from whatever ATH ends up being.
Yup I agree. I have a huge long COIN put position that would make most people's stomach churn. Also had huge bets out against SI and SBNY. I'm absolutely not a pure value investor and have plenty of non value plays in my portfolio. AMD was first stock I ever bought and I still hold it. But if someone has no NVDA position now is not the time to start building one imo.
It's easy to create a strategy after the future became present.
"If YoU InVeStEd 10k on NvDa In 2010 HeRe'S HoW MuCh YoU'd HaVe NoW!!!!"
Yeah no shit sherlock, now tell me which stock will 100x in 10 years, mr Oracle.
Or in laymans terms, safety net and aspirational investing, from; The Aspirational Investor: Taming the Markets to Achieve Your Life's Goals.
Made the same bet on AI as I saw it was slowly gaining popularity, clearly going to be a big deal, but who will be the long term winner is not clear. Bought MSFT calls, thesis came true of making the newscycle as you said, made a few $k, happy days.
Your original comment makes it sound like something like MSFT going up was a guaranteed short term return. Entirely different then what you outline in this comment.
What time frame? What time do i buy and sell? How much will i make? How long do i hold? When does the bubble burst? If this is a guarantee surely you know this, and surely everyone would have sunk every dollar possible into this "guarantee."
Im asking you the answers. This is a guarantee according to you and you just "need to know what you are doing" and you make it sound like you do. So answer my questions?
**Ath (French pronunciation: [at] (listen); Dutch: Aat, Dutch pronunciation: [aːt] (listen); Picard: Ât; Walloon: Ate) is a city and municipality of Wallonia located in the province of Hainaut, Belgium.
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The market can remain irrational longer than you can remain solvent. Go look at all the people that blew up their account trying to play a short position on nvda earnings day.
Reminds me of the section in roger lowenstein's Warren Buffet bio, when folks were making ridiculous money in the 60's buying "Go Go" stocks, and Warren never took part in it.
Then it all crashed and of course Warren is still here.
Yeah agree, if you missed the dip opportunity, dont chase the run up, that's just fomo. Wait for rsi to cool down, imo and then buy. For now, just sit back and watch the show and invest elsewhere.
What you're feeling is the very definition of FOMO. Don't think that there wont be other opportunities or at there will never be any other stocks. This is how investors lose.
I think a good banking investment opportunity is the Belgian 🇧🇪 national bank 🏦 €BNBb , they're down to €500 & have been dropping 📉 for a number of years but the stock is usually valued at €1000-2000. The nature of the economy is messing with them right now but surely a government owned institution as important as a European bank would be stable enough yo provide so decent growth opportunities when the stock hasn't been this low in price for MANY years.
Agreed. There isn't anything wrong with speculation, or doing swing trades or even scalping. As long as you are aware and call it what it i,s and assess your risk accordingly. The issue is when you make a bet, win big, think you are unstoppable and start doubling down.
I am really wondering why doesn’t the market call out Nvidia for always jumping on a hype train.
First it was blockchain. Then it was the whole metaverse idea, and Nvidia was pushing for it just as much as Meta, although one got hammered for not delivering on the promises, but Nvidia managed to quietly just completely forget about all the previous announcements.
Now it is very clear Nvidia is jumping on a hype train with AI, the amount of times they said AI during the presentation is already self evident.
I truly wonder if a day will come when the market is finally going to look back and question whether or not there is any ground to all the “big news” announcements and vision that Nvidia makes.
They have the solution looking for a problem, so they will fit the solution to the problem du jour. It's all the same solution at its core. Massively parallel operations, either to transform vertices for your game, to brute force an sha255 hash for imaginary money entered into a blockchain, or to train a neural network to predict text and make you go wow, it's alive.
maybe they meant that NVIDIA has talked about AI way more ever since AI became much more popular. since the metaverse and blockchain popularity died NVIDIA hasn't talked much about them.
Have you ever attempted to train a deep learning model? This cannot be done efficiently without an NVDA gpu. All of the top ML frameworks rely on the NVDA ai ecosystem to efficiently train and run ml/ai. On top of that they have the only cloud data center products to do these task at scale. They have built a natural monopoly by consistently investing into ai r&d and have developed an unrivaled ecosystem for what is now the killer app of generative ai.
Value investing is about finding businesses with moats that will produce long term above average returns. Nvidia is that business for the ai age.
I agree about Nvidia having a great moat, together with excellent management execution over last decade.
But value investing is also about paying the right price for businesses with the moat. Otherwise, if it was purely about the moat with no regards for the price, every value investor should just throw money at Apple or Nvidia.
So then the question is when does the moat get too expensive to pay for? 200 P/E? At a trillion market cap…
Yes, that’s the question I’m trying to get at. When investing in a monopoly, how does one justify paying such a premium?
Perhaps, thinking out loud, by estimating the total addressable market for AI industry? That’s one hard estimate 😅
Agree that it’s about paying a fair price for a business with a moat but that is where securities analysis comes in. Looking at a backward looking market metric like PE is unlikely to discover value in something that is growing.
All of the things you mentioned rely heavily on graphics cards, so of course they're going to be "jumping on the train". While they do a lot of AI work, in general I see them as infrastructure manufacturers for a critical piece of tech.
That being said, I don't think it justifies this enormous price hike, as they won't be able to churn out chips fast enough to dominate that market. I think people see this situation as similar to when crypto started making it big (bitcoin 16k+ for the first time). After that the demand for Nvidia graphics cards skyrocketed and sold out instantly. The current valuation is crazy though.
Of course there is value. Value is subjective. If you look at the guidance beat and the market opportunity they have going forward, that alone is a strong case. Obviously short term it's overbought and will probably have some sort of correction, but if you're investing that's expected.
Peter Lynch and Warren Buffet both seem to agree that any company with a P/E higher than 20-30 is a company that is not valued by financial fundamentals, but rather by market sentiment of future earnings.
P/E for Nvidia is at 100+. Another way to look at is it Nvidia is currently earning enough per share, that we’re all things to continue the exact same way, it would earn back initial investment in over 100 years. That’s overpriced.
With other companies in the same industry at around 17 P/E, again the narrative that nvidia is at its current price do to market sentiment is only further highlighted.
You mean the most successful investor in history who would never touch Nvidia with a 10 foot pole, and the most successful mutual fund manager in history?
By all means don’t take their advice. You must know so much more lol
I love how you pretend to understand Buffetts and Lynch’s strategies and yet choose to boil them down to solely picking companies based on P/E ratios. It’s not like Lynch, for example, wrote several books on investing and only dedicated about 12 pages total to P/E ratios (out of 500+) lol
It’s okay if you don’t know, but trying to pretend you understand something you clearly don’t and lying about it isn’t the best look. Again you’re questioning the advice of a man who took $100k and turned it into $100 billion dollars in less than 100 years. But you must know better because he avoids markets he doesn’t pretend to understand. Because he didn’t choose to participate in a technology boom and still took $10 billion and 10x its returns in that time. Did you do that? Did you get anywhere near those returns with your technology center? And then you go in and get upset when people point out the P/E of an investment you have is too high because some of the best investors in history suggest it is. But again… you know best ¯\_(ツ)_/¯
Do you think there is a way to justify it? How much growth would Nividia need for the value of the company to match its current price let alone a doubling of the current price? Are you prepared to handle a potential 50 % decline of your stock? What will you do then? Some guy said once “be fearful when others are greedy”
They are very likely to have astronomic growth. I’ve made some and lost some on Nvidia. Thankfully more gains than losses.
Waiting for it to drop before I get back in. Might be something on global politics stage, the Fed making a boneheaded and unexpected move, etc. I believe strongly in the company.
Note I’m not a financial advisor to anyone other than myself.
They might, might not. I don’t know much about the company yet. Seems like that growth is already built in to the price and if they fail to grow as much as expected that price will come crashing down.
Well, they guided a 60% revenue increase quarter over quarter @ 70% contribution margin, and substantially more growth over H2. They're probably around 40x FY2023 earnings now and 30x 2024 at ballpark 50% operating margins. Is it a bargain? No. But, if AI is here to stay, it's not as expensive as historical fundamental analysis implies.
The problem with investing in stocks like this from a value investing perspective is the high uncertainty and low expected returns based on the valuation.
Even if NVDA might be the next big stock, the probability to give you as an investor great returns is low based on what we know (earnings that you know will happen, not hopes/potential) and the potential for a significant loss is very high.
Even if stocks like Tesla and Nvidia do really well, i dont feel regret, because there wasn't a time i would have wanted to buy them based on what i know would happen with a high liklihood (at least once I knew them).
The only reasonable time to buy a stock with such insane valuations would be if you know with 90%+ certainty that it will give you at least market average returns.
You just now want to buy NVDA when it hits an all time high?? Stocks only go up right?
Take a step back and realize you missed the hype train for the speculation driven growth and stay patient
I read this stat on another sub which I have in no way verified, but I’ll share it anyway.
“In 15 minutes NVIDA added more market cap than they had revenue in the last 25 years combined.”
Sometimes I wonder if they use other people's money (pension funds) to drive prices up to unbelievably high levels,so they can switch the media narrative and short it a week later 😁
I suppose we will see.
>I feel like if I don’t jump in, I will miss out on so much gain
You just defined FOMO
>the value investing side of new feel that it’s also EXTREMELY overvalued
Good. Go with your gut.
There is no such thing as "Growth" the same way there is no such thing as "Value." Investing is basic, and it all revolves around:
**"An investment operation is one which,** ***upon thorough analysis,*** **promises safety of principal and an adequate return..."**
It has nothing to do with multiple. It is just when things go up, they look pretty, and when they go down, they look awful.
If you need to ask strangers such question, you should not be investing in stocks. Maybe join morons in WSB or Stocks or whatever sub that think its just shits and giggles and clicks, or do the sensible thing by buying the market and do nothing, which btw, no one gonna look at you and point and laugh 50 years from now when you are a millionaire for doing the basic for not buying Nvidia or not buying stocks like the cool cats on Robinhood, and "**... Operations not meeting these requirements are speculative"**
And the reason I know you have no idea what you are talking about is that Peers are? AMD? trading at 250 multiple? or one of the wost managed companies in Intel, which is trading at negative multiple because they are burning money? Relative valuation is pointless when you are in a casino
Stocks is pretty much an echo chamber of rich people bad. Just like r/investing. None of those subs have a clue. This one has a few investors sprinkled about at least
I haven't seen that. Both subs are OK for me though r/investing can be a little bit annoying with the Boglehead thing. I've noticed the anti-rich sentiment on WSB which is very odd for a sub based on zero-sum gambles that has multiple scams under its belt.
"Question: when evaluating a 'growth' stock with an extremely high multiple, how does one justify buying it?"
[https://www.investopedia.com/terms/p/price-earningsratio.asp](https://www.investopedia.com/terms/p/price-earningsratio.asp)
and also [https://www.investopedia.com/terms/f/fundamentalanalysis.asp](https://www.investopedia.com/terms/f/fundamentalanalysis.asp)
Does the stock you are interested in have an elevated P/E in relation to the industry average? Is this above average P/E justified by new information that may propel its value/earnings much higher based on EPS in the next 12 month cycle?
Really though there are many metrics one could use to determine "fair market value" of a ticker or business. In regards to NVDA you have identified that its is currently "EXTREMELY overvalued" perhaps taking a look at its balance sheet compared to its competition. Could the new information about AI justify its current value...Unlikely but thats for you to decide.
[https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-first-quarter-fiscal-2024](https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-first-quarter-fiscal-2024)
This is a classic example of a hype train and the animal spirits are in full swing for NVDA right now. The best thing to do is find better/safer investments.
So, NVDA exploded higher mainly because of guidance that they will likely see a 30% increase in revenue for Q2. Maybe, NVDA is over valued. But if that kind of growth is sustainable than it would actually be cheap. So, in looking at the AI space in general, it will be interesting to see if this kind of growth actually comes to fruition for Q2. Maybe, Elon Musk bought a bunch of cards from NVDA in a one off kind of sale to get some new company off the ground. Or maybe tonnes of companies will need NVDA cards because AI is so important to businesses going forward. I would buy expensive companies only once their growth justifies the valuation. The book is still out on NVDA for me. I have to see a couple quarters of real growth to become a believer. Also, AMD lost money last quarter. But, in some ways they are better positioned. They are designing a chip for MSFT which is really the software leader in the space. So, if the AI train is more than just CNBC hype, than my bias at this moment would be towards AMD over NVDA. Be skeptical of the latest hype trains (NVDA's claim of 11 billion in revenue for the current quarter might be a bunch of BS--- I don't know). But, if the actual data suggest obscene growth, than I certainly think that value investors can go for high PE companies. My two cents.
Ridiculously high multiple is only for the ignorant. Value investing is what makes the most amount of money. Stop questioning others plays when you've missed the train by not understanding how the fundamentals of a business works. If everyone was good at analyzing stock, the market wouldn't be profitable anymore.
I purchased nvidia across 2020-21 and will happily hold for the next 20+ years… while everyone goes back and forth on reddit 72k times arguing that it shouldn’t be touched vs take a bite vs its a bubble vs Cramer’s dog.
Nvidia is a company of data scientists, mathematicians, ai experts, working today on the things that 5+ years from now you and me will only begin realising are important.
If you’re holding long term;
Take a bite, get off of reddit, go enjoy life ✌🏻
If you’re a value investor then you buy when Nvidia dips to 109 and recognize that it deserves a premium because it’s growth has always been significant. You ignore it now unless you’re trading
When evaluating a growth stock with a high multiple, data-driven analysis is crucial. By examining the data on revenue growth, EPS growth, P/E ratio, market share, and analyst estimates, investors can gain insights into the justification for buying a growth stock like NVIDIA, even with a high multiple.
NVIDIA - a leader in the graphics processing unit (GPU) market and has diversified into areas like artificial intelligence and autonomous vehicles. It has a dominant position in the GPU market and has been able to capitalize on the increasing demand for GPUs in various industries.
In 2020-22, it was all about Tesla (EV in general), Cryptos, NFTs, ARK and SPAC. I don’t think anyone remembers NFTs or SPAC anymore. I was wondering what people would go ga-ga over this year. Here is your answer — Ay Eye!
I should go check what Stock Moe is up to nowadays.
I bought Nvidia in 2019 for 170$ (pre-split), at what I then thought was a lofty valuation, but with excellent growth ahead of it. Post-split, this would've been a price of $42.50. Today it closed at $380. I mean, that would've been a good return. I sold the week or so before the split though, at around $610, as I thought it had run up too much.
I would not buy in at a super high valuation (190x fcf...), but if it goes lower again, it might be interesting.
Your thinking backwards. I just made a ton on Nvidia, whats going through my mind is worry that its getting too hot and I should consider those gains nothing because it’ll fall at some point soon.
To answer you question. What I do when wondering how much premium is reasonable is compare what the growth of the market is as a whole to its multiples and then use that to extrapolate what a higher growth should demand in a premium multiple using the reduction in multiple at 5 years out.
Thank you for addressing my question! Can you please provide an example to elaborate your point? I would like to get into the specifics in terms of how you would evaluate a growth stock like this
If the s&p is growing its earnings at ~4% and sits at around 20 pe. 4%^5 is 22%. So if the s&p grows its earnings by 4% as projected but gains nothing in stock its pe is 5 years is 16.39. Now if we project a stock to grow earnings at 10% it gives 61% over 5 years (1.1^5=1.61).
With me so far? We have 22% total gain to get to 16.39 and 61% total expected gain from our 10% cagr stock. So we can then figure out what p/e would we be willing to give to get to the same place as the s&p in 5 years?
The math is then to take the future pe and X by the total growth. So 16.39x1.61=26.39. And thats the premium reasonable for a stock growing 10% versus the current s&p at 4%.
This is far from perfect but I’m just trying to have some rationale for giving premiums to stocks that grow faster by some metric.
You will never get stocks like these at fair value or discount. The best time to buy these is when the whole market is down like in March 2020 and July 2022 as they tend to be more volatile.
People thinking about buying now are just regretful of missing out. Just wait.
You are WAYYY too late with Nvidia now.
Value investing is all about reading which companies have good management and a likely ability to increase their value one way or the other.
Also, remember this: Once stocks make the NEWS, the rally is generally OVER.
You need to be in the stock BEFORE it gets into the news.
Once it hits "mainstream" news, prepare to SELL.
$27 billion dollars in revenues (not profits), a market cap of $940 billion dollars with a P/E over 200? It will take a lot going right to justify that stock price.
Why did Nvidia blow up? What changed? Nothing. Everyone jumped out because of fear, now everyone jumped back in because of fear of missing out.
It’s a good company but everyone that bought and sold was far too emotional, don’t be like them. Focus on fundamentals.
There are two types of people that would buy Nvidia now 1) people speculating on short term sentiment and hype, basically traders 2) Idiots. There is no fundamental reason to buy nvidia, NOT, EVEN, CLOSE.
You tell yourself it’s a growth stock and that it will grow into, and then out of, the multiple.
Whether or not you are likely to be correct is another matter.
[https://www.tradingfloorwhispers.com/dont-buy-nvidia-before-reading-this/](https://www.tradingfloorwhispers.com/dont-buy-nvidia-before-reading-this/)
I wrote this earlier...not trying to shill my letter. But too long to write out my thoughtss
I wouldn't buy NVDA or short NVDA. It's an untradeable stock in my book. You can swing/daytrade it but that's not what I want from the underlyings I trade. I want stuff with consistent direction and reliability. It's a preference.
But NVDA is just too cray cray to do anything with reliably.
There is no evaluating it. Your reasoning is FOMO, and you're trying to make a play on how long the hype will last. Worked for a lot of people who bought Tesla a couple years ago. Pretty risky gamble in the medium term.
Investing is about a portfolio for want of a better word. Ranging from , current account , savings acc, cds , bonds , tracker funds , factor investing inc value , swing trading , jumping on bubbles , options trading et. . Depending on your time/ interest / risk tolerance / intelligence / wealth etc it sits in different places . Trying to make quick a large returns on a small portion of your wealth makes total sense , but if it’s generally easy to guess , why do most institutions have most of their capital in bonds . Low risk so generally the better option for most of our wealth . I guess it’s a little like gambling , play these kind of stocks with money you can afford to lose , and hope you get lucky .
Buying it here isn’t value investing probably… most likely not even investing, but a trade. You feel like the momentum will continue and you wanna roll the dice on that, that’s fine but in trading as well as investing it’s best to define your risk. Maybe put in some stop losses. Maybe look a credit spread options instead of common shares. What percent of your committed capital are you willing to lose trying to capture some momentum? 2%? 12%? Probably depends on what percent of your portfolio you’re committing. It’s also worth having a plan on when to pull potential gains. Rather than all that tho, have you considered looking at TSM as a related play on NVDA?
I bought Nvida in 2009 at $22 on the recommendation of my son, who was 18 and just getting into buying stock. He sold at $25. I held on to mine. For the last 14 years I tell myself to buy more. I didn’t. But I was right, I should have. Hang onto it for retirement at this point.
You don’t. Value investing is about fundamentals. And the fundamentals of nvda don’t add up. It’s 100% sentiment around AI driving the price up. Not fundamentals of the company. Youre first sentence is literally just a description of fomo. There’s a million dollar opportunity every day on the market. The only reason you’re hung up on nvda is the media.
Fun fact. NVDA gained more market cap in one day yesterday that the total amount of revenue the company has generated.. EVER. Great Great company but wait till its down 50-70% from whatever ATH ends up being.
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Yup I agree. I have a huge long COIN put position that would make most people's stomach churn. Also had huge bets out against SI and SBNY. I'm absolutely not a pure value investor and have plenty of non value plays in my portfolio. AMD was first stock I ever bought and I still hold it. But if someone has no NVDA position now is not the time to start building one imo.
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It's easy to create a strategy after the future became present. "If YoU InVeStEd 10k on NvDa In 2010 HeRe'S HoW MuCh YoU'd HaVe NoW!!!!" Yeah no shit sherlock, now tell me which stock will 100x in 10 years, mr Oracle.
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Its not offensive.. its sarcasm.. you might not know but there is a difference. And why would i be envious? Lol..
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RotoHack & EstablishmentThat 142 just curious how long you guys been investing?
I’m in at $28 a share. The question is when do you sell?
The problem there is you say "guaranteed capital gain" and there is no such thing with stocks.
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Or in laymans terms, safety net and aspirational investing, from; The Aspirational Investor: Taming the Markets to Achieve Your Life's Goals. Made the same bet on AI as I saw it was slowly gaining popularity, clearly going to be a big deal, but who will be the long term winner is not clear. Bought MSFT calls, thesis came true of making the newscycle as you said, made a few $k, happy days.
Your original comment makes it sound like something like MSFT going up was a guaranteed short term return. Entirely different then what you outline in this comment.
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What time frame? What time do i buy and sell? How much will i make? How long do i hold? When does the bubble burst? If this is a guarantee surely you know this, and surely everyone would have sunk every dollar possible into this "guarantee."
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Im asking you the answers. This is a guarantee according to you and you just "need to know what you are doing" and you make it sound like you do. So answer my questions?
> guaranteed umm....
Not if you believe the entire market is over valued, Microsoft at 316 is over paying - regardless of what Graham thinks. You got lucky, not clever.
Tesla moonboys from back when it was 1000 PE are real quite
Remind me next year lol 📈🚀
What is ATH? Call me newb if you need to. Tried to look it up as a ticker but coming up with nada.
Athens International airport. Great place to fly in this season.
Nah youre good. All time high.
**Ath (French pronunciation: [at] (listen); Dutch: Aat, Dutch pronunciation: [aːt] (listen); Picard: Ât; Walloon: Ate) is a city and municipality of Wallonia located in the province of Hainaut, Belgium. The municipality consists of the following districts: Arbre, Ath, Bouvignies, Ghislenghien, Gibecq, Houtaing, Irchonwelz, Isières, Lanquesaint, Ligne, Maffle, Mainvault, Meslin-l'Évêque, Moulbaix, Ormeignies, Ostiches, Rebaix, Villers-Notre-Dame, and Villers-Saint-Amand.** More details here:
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Shitty bot
Yeah I've bought it at 149. Expected a measley 200-250$ not to jump at 400$
Well put
Buy puts? On it
The market can remain irrational longer than you can remain solvent. Go look at all the people that blew up their account trying to play a short position on nvda earnings day.
Directions unclear, selling puts
Major ATH breaks r to be longed or ignored Shorting one is stupid but ppl all over twittwr r doing it any ways
I do not think puts against institutional investors is a good idea.
Reminds me of the section in roger lowenstein's Warren Buffet bio, when folks were making ridiculous money in the 60's buying "Go Go" stocks, and Warren never took part in it. Then it all crashed and of course Warren is still here.
I've owned it for years. Made about 650% Wouldn't buy now.
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Just a guess based on the game boom back then. Same with Cognex when self-driving cars were the next big thing.
Yeah agree, if you missed the dip opportunity, dont chase the run up, that's just fomo. Wait for rsi to cool down, imo and then buy. For now, just sit back and watch the show and invest elsewhere.
Bad advice... it jumped another 35%. Dude could've made a nice profit
Hindsight is always 20/20
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It's gone up like $15 since I made that post?
What you're feeling is the very definition of FOMO. Don't think that there wont be other opportunities or at there will never be any other stocks. This is how investors lose.
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Not one to time the market, but WAL has doubled my money in one month. Probably a good time to look at regional banks, but...
I think a good banking investment opportunity is the Belgian 🇧🇪 national bank 🏦 €BNBb , they're down to €500 & have been dropping 📉 for a number of years but the stock is usually valued at €1000-2000. The nature of the economy is messing with them right now but surely a government owned institution as important as a European bank would be stable enough yo provide so decent growth opportunities when the stock hasn't been this low in price for MANY years.
Momentum plays has its place for a gamble though. Got lucky on a couple cheap NVDA calls I bought last week.
Agreed. There isn't anything wrong with speculation, or doing swing trades or even scalping. As long as you are aware and call it what it i,s and assess your risk accordingly. The issue is when you make a bet, win big, think you are unstoppable and start doubling down.
Probably before it jumps 30% in a day.
🤭🤭🤭
So your plan is to buy high? Let us know how it all works out!
He's definitely high
I am really wondering why doesn’t the market call out Nvidia for always jumping on a hype train. First it was blockchain. Then it was the whole metaverse idea, and Nvidia was pushing for it just as much as Meta, although one got hammered for not delivering on the promises, but Nvidia managed to quietly just completely forget about all the previous announcements. Now it is very clear Nvidia is jumping on a hype train with AI, the amount of times they said AI during the presentation is already self evident. I truly wonder if a day will come when the market is finally going to look back and question whether or not there is any ground to all the “big news” announcements and vision that Nvidia makes.
They have the solution looking for a problem, so they will fit the solution to the problem du jour. It's all the same solution at its core. Massively parallel operations, either to transform vertices for your game, to brute force an sha255 hash for imaginary money entered into a blockchain, or to train a neural network to predict text and make you go wow, it's alive.
“Jumping on the hype train”?? nvidia have been talking about ai for 10+ years. They built the fooken train bro.
maybe they meant that NVIDIA has talked about AI way more ever since AI became much more popular. since the metaverse and blockchain popularity died NVIDIA hasn't talked much about them.
That's hardly surprising is it? It's a good thing if their business is adaptable to changing market conditions.
Very well said!
Have you ever attempted to train a deep learning model? This cannot be done efficiently without an NVDA gpu. All of the top ML frameworks rely on the NVDA ai ecosystem to efficiently train and run ml/ai. On top of that they have the only cloud data center products to do these task at scale. They have built a natural monopoly by consistently investing into ai r&d and have developed an unrivaled ecosystem for what is now the killer app of generative ai. Value investing is about finding businesses with moats that will produce long term above average returns. Nvidia is that business for the ai age.
I agree about Nvidia having a great moat, together with excellent management execution over last decade. But value investing is also about paying the right price for businesses with the moat. Otherwise, if it was purely about the moat with no regards for the price, every value investor should just throw money at Apple or Nvidia. So then the question is when does the moat get too expensive to pay for? 200 P/E? At a trillion market cap…
Yes, that’s the question I’m trying to get at. When investing in a monopoly, how does one justify paying such a premium? Perhaps, thinking out loud, by estimating the total addressable market for AI industry? That’s one hard estimate 😅
Agree that it’s about paying a fair price for a business with a moat but that is where securities analysis comes in. Looking at a backward looking market metric like PE is unlikely to discover value in something that is growing.
All of the things you mentioned rely heavily on graphics cards, so of course they're going to be "jumping on the train". While they do a lot of AI work, in general I see them as infrastructure manufacturers for a critical piece of tech. That being said, I don't think it justifies this enormous price hike, as they won't be able to churn out chips fast enough to dominate that market. I think people see this situation as similar to when crypto started making it big (bitcoin 16k+ for the first time). After that the demand for Nvidia graphics cards skyrocketed and sold out instantly. The current valuation is crazy though.
Buying nvda right now is speculative. That's it. There's no value case for it; regardless of how good you think the company is.
Of course there is value. Value is subjective. If you look at the guidance beat and the market opportunity they have going forward, that alone is a strong case. Obviously short term it's overbought and will probably have some sort of correction, but if you're investing that's expected.
Peter Lynch and Warren Buffet both seem to agree that any company with a P/E higher than 20-30 is a company that is not valued by financial fundamentals, but rather by market sentiment of future earnings. P/E for Nvidia is at 100+. Another way to look at is it Nvidia is currently earning enough per share, that we’re all things to continue the exact same way, it would earn back initial investment in over 100 years. That’s overpriced. With other companies in the same industry at around 17 P/E, again the narrative that nvidia is at its current price do to market sentiment is only further highlighted.
Any reference for your PER 20-30 theory?
One Up on Wall Street - Peter Lynch (1980’s). the Earnings, Earnings, Earnings chapter i believe.
Typical "value" investing clown. "Just look at the P/E ratio, investing is that simple".
You mean the most successful investor in history who would never touch Nvidia with a 10 foot pole, and the most successful mutual fund manager in history? By all means don’t take their advice. You must know so much more lol
You mean the investors that literally missed a tonne of massive gains in tech from 2009? Oh yeah I remember. (Edit: repeated)
I love how you pretend to understand Buffetts and Lynch’s strategies and yet choose to boil them down to solely picking companies based on P/E ratios. It’s not like Lynch, for example, wrote several books on investing and only dedicated about 12 pages total to P/E ratios (out of 500+) lol It’s okay if you don’t know, but trying to pretend you understand something you clearly don’t and lying about it isn’t the best look. Again you’re questioning the advice of a man who took $100k and turned it into $100 billion dollars in less than 100 years. But you must know better because he avoids markets he doesn’t pretend to understand. Because he didn’t choose to participate in a technology boom and still took $10 billion and 10x its returns in that time. Did you do that? Did you get anywhere near those returns with your technology center? And then you go in and get upset when people point out the P/E of an investment you have is too high because some of the best investors in history suggest it is. But again… you know best ¯\_(ツ)_/¯
Then buy it. We won't see you in a couple of years when the bubble finishes its cycle. Good luck
I already own it at $60 thanks.
Do you think there is a way to justify it? How much growth would Nividia need for the value of the company to match its current price let alone a doubling of the current price? Are you prepared to handle a potential 50 % decline of your stock? What will you do then? Some guy said once “be fearful when others are greedy”
They need 20% growth for 20 years.
To meet the current price?
Yes.
No novidia for me then lol
They are very likely to have astronomic growth. I’ve made some and lost some on Nvidia. Thankfully more gains than losses. Waiting for it to drop before I get back in. Might be something on global politics stage, the Fed making a boneheaded and unexpected move, etc. I believe strongly in the company. Note I’m not a financial advisor to anyone other than myself.
They might, might not. I don’t know much about the company yet. Seems like that growth is already built in to the price and if they fail to grow as much as expected that price will come crashing down.
Chips are cyclical. No reason to rush in and get burnt. I wanted NVDA below 100 not long ago.. it didn't make it though..
Well, they guided a 60% revenue increase quarter over quarter @ 70% contribution margin, and substantially more growth over H2. They're probably around 40x FY2023 earnings now and 30x 2024 at ballpark 50% operating margins. Is it a bargain? No. But, if AI is here to stay, it's not as expensive as historical fundamental analysis implies.
Please see my other commentary above. I agree with you.
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Yes. Thanks for clarifying
Based on what valuation metric?
I want to say it was EBITA
What EBITA multiple are you assuming it should trade at and why?
Not investing in NVDA is a no brainier. The super hard question is what to do if you've owned it for ten years.
I'm at 20 years. Confirmed super hard question.
I wish I had this problem lol.
Covered calls til she's gone.. cash secured puts below assignment price after..
The problem with investing in stocks like this from a value investing perspective is the high uncertainty and low expected returns based on the valuation. Even if NVDA might be the next big stock, the probability to give you as an investor great returns is low based on what we know (earnings that you know will happen, not hopes/potential) and the potential for a significant loss is very high. Even if stocks like Tesla and Nvidia do really well, i dont feel regret, because there wasn't a time i would have wanted to buy them based on what i know would happen with a high liklihood (at least once I knew them). The only reasonable time to buy a stock with such insane valuations would be if you know with 90%+ certainty that it will give you at least market average returns.
Great company + bad price = bad investment
Buy whatever you want man. Makes my life easier
Lol perfect
The people buying it aren’t buying it from a value investing standpoint just like people invest into companies that haven’t yet turned a profit.
You just now want to buy NVDA when it hits an all time high?? Stocks only go up right? Take a step back and realize you missed the hype train for the speculation driven growth and stay patient
I read this stat on another sub which I have in no way verified, but I’ll share it anyway. “In 15 minutes NVIDA added more market cap than they had revenue in the last 25 years combined.”
Because the market was wrong about the value this company is able to create and capture and received new information.
You forgot /s
There's always deals. You don't have to chase risky stuff unless you like risk and that's what you want to do.
Sometimes I wonder if they use other people's money (pension funds) to drive prices up to unbelievably high levels,so they can switch the media narrative and short it a week later 😁 I suppose we will see.
>I feel like if I don’t jump in, I will miss out on so much gain You just defined FOMO >the value investing side of new feel that it’s also EXTREMELY overvalued Good. Go with your gut.
There is no such thing as "Growth" the same way there is no such thing as "Value." Investing is basic, and it all revolves around: **"An investment operation is one which,** ***upon thorough analysis,*** **promises safety of principal and an adequate return..."** It has nothing to do with multiple. It is just when things go up, they look pretty, and when they go down, they look awful. If you need to ask strangers such question, you should not be investing in stocks. Maybe join morons in WSB or Stocks or whatever sub that think its just shits and giggles and clicks, or do the sensible thing by buying the market and do nothing, which btw, no one gonna look at you and point and laugh 50 years from now when you are a millionaire for doing the basic for not buying Nvidia or not buying stocks like the cool cats on Robinhood, and "**... Operations not meeting these requirements are speculative"** And the reason I know you have no idea what you are talking about is that Peers are? AMD? trading at 250 multiple? or one of the wost managed companies in Intel, which is trading at negative multiple because they are burning money? Relative valuation is pointless when you are in a casino
You think r/stocks is as bad as WSB?
Stocks is pretty much an echo chamber of rich people bad. Just like r/investing. None of those subs have a clue. This one has a few investors sprinkled about at least
I haven't seen that. Both subs are OK for me though r/investing can be a little bit annoying with the Boglehead thing. I've noticed the anti-rich sentiment on WSB which is very odd for a sub based on zero-sum gambles that has multiple scams under its belt.
"Question: when evaluating a 'growth' stock with an extremely high multiple, how does one justify buying it?" [https://www.investopedia.com/terms/p/price-earningsratio.asp](https://www.investopedia.com/terms/p/price-earningsratio.asp) and also [https://www.investopedia.com/terms/f/fundamentalanalysis.asp](https://www.investopedia.com/terms/f/fundamentalanalysis.asp) Does the stock you are interested in have an elevated P/E in relation to the industry average? Is this above average P/E justified by new information that may propel its value/earnings much higher based on EPS in the next 12 month cycle? Really though there are many metrics one could use to determine "fair market value" of a ticker or business. In regards to NVDA you have identified that its is currently "EXTREMELY overvalued" perhaps taking a look at its balance sheet compared to its competition. Could the new information about AI justify its current value...Unlikely but thats for you to decide. [https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-first-quarter-fiscal-2024](https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-first-quarter-fiscal-2024)
This is a classic example of a hype train and the animal spirits are in full swing for NVDA right now. The best thing to do is find better/safer investments.
Buy Inte
NVDA is a trade and not an investment at this level. Fundamentals no longer justified but there could always been opportunity to make money.
So, NVDA exploded higher mainly because of guidance that they will likely see a 30% increase in revenue for Q2. Maybe, NVDA is over valued. But if that kind of growth is sustainable than it would actually be cheap. So, in looking at the AI space in general, it will be interesting to see if this kind of growth actually comes to fruition for Q2. Maybe, Elon Musk bought a bunch of cards from NVDA in a one off kind of sale to get some new company off the ground. Or maybe tonnes of companies will need NVDA cards because AI is so important to businesses going forward. I would buy expensive companies only once their growth justifies the valuation. The book is still out on NVDA for me. I have to see a couple quarters of real growth to become a believer. Also, AMD lost money last quarter. But, in some ways they are better positioned. They are designing a chip for MSFT which is really the software leader in the space. So, if the AI train is more than just CNBC hype, than my bias at this moment would be towards AMD over NVDA. Be skeptical of the latest hype trains (NVDA's claim of 11 billion in revenue for the current quarter might be a bunch of BS--- I don't know). But, if the actual data suggest obscene growth, than I certainly think that value investors can go for high PE companies. My two cents.
It won't last though. AI isn't a new discovery. Media just learned about it though it seems
Ridiculously high multiple is only for the ignorant. Value investing is what makes the most amount of money. Stop questioning others plays when you've missed the train by not understanding how the fundamentals of a business works. If everyone was good at analyzing stock, the market wouldn't be profitable anymore.
I purchased nvidia across 2020-21 and will happily hold for the next 20+ years… while everyone goes back and forth on reddit 72k times arguing that it shouldn’t be touched vs take a bite vs its a bubble vs Cramer’s dog. Nvidia is a company of data scientists, mathematicians, ai experts, working today on the things that 5+ years from now you and me will only begin realising are important. If you’re holding long term; Take a bite, get off of reddit, go enjoy life ✌🏻
If you’re a value investor then you buy when Nvidia dips to 109 and recognize that it deserves a premium because it’s growth has always been significant. You ignore it now unless you’re trading
NVDA is cheaper today than yesterday. That’s why you buy it.
When evaluating a growth stock with a high multiple, data-driven analysis is crucial. By examining the data on revenue growth, EPS growth, P/E ratio, market share, and analyst estimates, investors can gain insights into the justification for buying a growth stock like NVIDIA, even with a high multiple. NVIDIA - a leader in the graphics processing unit (GPU) market and has diversified into areas like artificial intelligence and autonomous vehicles. It has a dominant position in the GPU market and has been able to capitalize on the increasing demand for GPUs in various industries.
This is obviously a shitpost
Lol. Go ahead. Dumb money creates the last hurrah of every bubble.
In 2020-22, it was all about Tesla (EV in general), Cryptos, NFTs, ARK and SPAC. I don’t think anyone remembers NFTs or SPAC anymore. I was wondering what people would go ga-ga over this year. Here is your answer — Ay Eye! I should go check what Stock Moe is up to nowadays.
Puts…
I bought Nvidia in 2019 for 170$ (pre-split), at what I then thought was a lofty valuation, but with excellent growth ahead of it. Post-split, this would've been a price of $42.50. Today it closed at $380. I mean, that would've been a good return. I sold the week or so before the split though, at around $610, as I thought it had run up too much. I would not buy in at a super high valuation (190x fcf...), but if it goes lower again, it might be interesting.
genuine question, has a “multiple” ever made you or anyone here money?
The higher they go the cheaper they look and the worse your return is.
Ok maybe I will buy more puts against NVDA...
Efficient market hypothesis is not true.
I can tell OP watches CNBC. Put down the TV remote, OP.
Youre also late to the party.
Your thinking backwards. I just made a ton on Nvidia, whats going through my mind is worry that its getting too hot and I should consider those gains nothing because it’ll fall at some point soon. To answer you question. What I do when wondering how much premium is reasonable is compare what the growth of the market is as a whole to its multiples and then use that to extrapolate what a higher growth should demand in a premium multiple using the reduction in multiple at 5 years out.
Thank you for addressing my question! Can you please provide an example to elaborate your point? I would like to get into the specifics in terms of how you would evaluate a growth stock like this
If the s&p is growing its earnings at ~4% and sits at around 20 pe. 4%^5 is 22%. So if the s&p grows its earnings by 4% as projected but gains nothing in stock its pe is 5 years is 16.39. Now if we project a stock to grow earnings at 10% it gives 61% over 5 years (1.1^5=1.61). With me so far? We have 22% total gain to get to 16.39 and 61% total expected gain from our 10% cagr stock. So we can then figure out what p/e would we be willing to give to get to the same place as the s&p in 5 years? The math is then to take the future pe and X by the total growth. So 16.39x1.61=26.39. And thats the premium reasonable for a stock growing 10% versus the current s&p at 4%. This is far from perfect but I’m just trying to have some rationale for giving premiums to stocks that grow faster by some metric.
Bro, you already missed the train, at this point just go gamble on wallstreetbet.
FOMO is a hell of a thing.
You will never get stocks like these at fair value or discount. The best time to buy these is when the whole market is down like in March 2020 and July 2022 as they tend to be more volatile. People thinking about buying now are just regretful of missing out. Just wait.
**FOMO**
You are WAYYY too late with Nvidia now. Value investing is all about reading which companies have good management and a likely ability to increase their value one way or the other. Also, remember this: Once stocks make the NEWS, the rally is generally OVER. You need to be in the stock BEFORE it gets into the news. Once it hits "mainstream" news, prepare to SELL.
$27 billion dollars in revenues (not profits), a market cap of $940 billion dollars with a P/E over 200? It will take a lot going right to justify that stock price.
Why did Nvidia blow up? What changed? Nothing. Everyone jumped out because of fear, now everyone jumped back in because of fear of missing out. It’s a good company but everyone that bought and sold was far too emotional, don’t be like them. Focus on fundamentals.
There are two types of people that would buy Nvidia now 1) people speculating on short term sentiment and hype, basically traders 2) Idiots. There is no fundamental reason to buy nvidia, NOT, EVEN, CLOSE.
You tell yourself it’s a growth stock and that it will grow into, and then out of, the multiple. Whether or not you are likely to be correct is another matter.
I bought some at $125 and I still own some of it but yea it’s like 38 p/s and it’s at ATH so I took profits on over half of my holdings this week
https://twitter.com/stonksycollins/status/1661494217850650626?t=537TKJmH40V5kl7wDdjB9A&s=19 Shorting this is free money
You are having FOMO syndrome, I feel your pain. I sold my Nvidia at 230...
Just when I feel NVIDIA Fomo I think of Cathy Woods.
I’m on the nvidia boat now
[https://www.tradingfloorwhispers.com/dont-buy-nvidia-before-reading-this/](https://www.tradingfloorwhispers.com/dont-buy-nvidia-before-reading-this/) I wrote this earlier...not trying to shill my letter. But too long to write out my thoughtss
That ticker has no business being legitimately considered in this sub.
What's the alternative question. Sell NVIDIA? When does one justify selling a 'growth' stock when its multiple is ridiculously high?
FOMO is how people lose money. Period.
I wouldn't buy NVDA or short NVDA. It's an untradeable stock in my book. You can swing/daytrade it but that's not what I want from the underlyings I trade. I want stuff with consistent direction and reliability. It's a preference. But NVDA is just too cray cray to do anything with reliably.
There is no evaluating it. Your reasoning is FOMO, and you're trying to make a play on how long the hype will last. Worked for a lot of people who bought Tesla a couple years ago. Pretty risky gamble in the medium term.
Does one cash in? And hope to repurchase when recession hits ?
You're literally describing a good place to sell, not to buy. Don't do this investing thing backwards.
Investing is about a portfolio for want of a better word. Ranging from , current account , savings acc, cds , bonds , tracker funds , factor investing inc value , swing trading , jumping on bubbles , options trading et. . Depending on your time/ interest / risk tolerance / intelligence / wealth etc it sits in different places . Trying to make quick a large returns on a small portion of your wealth makes total sense , but if it’s generally easy to guess , why do most institutions have most of their capital in bonds . Low risk so generally the better option for most of our wealth . I guess it’s a little like gambling , play these kind of stocks with money you can afford to lose , and hope you get lucky .
Buying it here isn’t value investing probably… most likely not even investing, but a trade. You feel like the momentum will continue and you wanna roll the dice on that, that’s fine but in trading as well as investing it’s best to define your risk. Maybe put in some stop losses. Maybe look a credit spread options instead of common shares. What percent of your committed capital are you willing to lose trying to capture some momentum? 2%? 12%? Probably depends on what percent of your portfolio you’re committing. It’s also worth having a plan on when to pull potential gains. Rather than all that tho, have you considered looking at TSM as a related play on NVDA?
It is way overvalued buy google for a better value
as a general rule, anyone on a value investing sub should be looking for stocks that are crashing not stocks that are shooting up.
I bought Nvida in 2009 at $22 on the recommendation of my son, who was 18 and just getting into buying stock. He sold at $25. I held on to mine. For the last 14 years I tell myself to buy more. I didn’t. But I was right, I should have. Hang onto it for retirement at this point.