Nvidia Whiffs

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.

 

5 thoughts on “Nvidia Whiffs

    1. Finster says:

      Aye … so far the closest it’s come is ChatGPT, basically a high tech toy.

      The potential of AI is real, and it’s spectacular. But it’s not new, and its main utility this past year has been as a marketing tool to keep the rabble distracted from concepts like discounted cash flow and excited into overpaying for Wall Street’s lucrative product line. Keep the bonus gravy train rolling and insider stock options in the green.

    1. Finster says:

      My memory of the details of KaPoom is fading, but something big is in the works. The evidence of which has really only been fully manifest in the bond market. We’ve just been through an epic bear market in bonds, with other markets, from stocks to housing to labor, still having little to show for it. Wile E Coyote has run off the edge of a cliff, but has yet to look down.

      Meanwhile gold has been on a tear, now floating comfortably above the $2000 level, rumors of its demise having been greatly exaggerated. Not really so much about gold per se though as it has been about the renewed slide in the dollar. The fact that copper, silver, platinum, foreign stocks and currencies are all “up” (in dollars) indicates that it’s the dollar that’s down. Not exactly what Powell Inc want to see, suggesting another inflationary impulse has entered the pipeline, en route to consumer prices, with the further implication that there could be yet more monetary tightening ahead.

      Even as markets have once again been rushing to price in the prospects of easing.

      In the wake of a grizzly bear market in bonds and a dectupling of short rates, most markets have been behaving as though bonds have sold off a little and there’ve been incremental increases in short term rates. Last year the yield curve inverted more deeply than in decades, and still hasn’t fully exited that configuration. And it’s more typical than not that uninversion of the yield curve is the more timely indicator of the portents of inversion itself.

      Kaaa … … …

  1. Finster says:

    “I figure all investment is intrinsically damn difficult. Good ideas get bid to such high prices that they get dangerous. There’s no investment that is so good you can’t ruin it by raising the price higher and higher, because none of them are worth an infinite amount of money.”

    – Charlie Munger

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