Nvidia shares traded down 1.74% after it announced blowout results after today’s close. Earnings and revenue both beat published estimates by a wide margin. It said it expected modestly slower sales growth in China, but nevertheless forecast fourth quarter revenue above analyst’s expectations. But the shares got little love.
What went wrong? Did Nvidia whiff? Or did the hype machine go so far into overdrive that it would have taken supernatural forces to lift shares?
This is a failure of the financial media, not the business. And of traders for investing far more than warranted credibility in said media. And for forgetting to crunch the numbers in deciding how much to pay for a stock, for allowing a good story to eclipse math. This is a great business and its products are marvels of engineering, but its shares are selling at too great a price. And it’s not alone … just a handful of supercap stocks are responsible for all the major cap weighted averages residing in rarified air.
The Magnificent Seven are the new Nifty Fifty of so many years ago, except with even more overvaluation tied up in even fewer stocks. On December 29 1989, the Nikkei 225 hit its all-time high 38,957.44, and remains lower even 33 years later. Investors lost fortunes, not because the likes of Sony, Panasonic, Toyota and Honda weren’t great businesses, but because they paid too much for them. This latest iteration of GAAP … growth at any price … won’t have a happy ending either.