NVDA was pushing a 170 to 175 trailing P/E at around the $300/share price. I've been tracking their profitability metrics for a long time. Their last fiscal year's metrics, while good, were nothing like the year before. So, in essence, their metrics are trending down.
Don't get me wrong. NVDA is a great company and it will do really well in the future. But, at the current price level, I think it is likely to get hit and hit hard sometime in the next 6 months. The AI craze has people paying through the nose for any company remotely connected with AI. The herd affect is clearly alive and well!
Earnings are next week. While I think they will be good, they are not likely to be as great as a 175 P/E would have you think, This is the first potential "crack" of disappointment which could send NVDA back down to much cheaper levels. Second, with the economy showing more and more signs of softness every day. A coming general market malaise is likely to snap the herd back to some type of reality. Possibly bringing the P/E down to 50 to 60.
Given these factors, I've trimmed back my holdings of NVDA. It's just not worth it. Two years ago it rose to similar heights and I held it. It dropped to 64% off the market high and it was painful to experience. With the recent rise over the last six months, I've gotten a chance to do a "do over" and I am doing it. There is just too much hype out there for AI. This is a time to take once-in-a-lifetime profits. If it drops down out of the clouds, I'll rebuy. NVDA is truly a great company with a great future. If it doesn't, I can live with what I've already earned.
Bulls make money. Bears make money, but pigs get slaughtered.
Be smart, be well-read, be aware and be successful.
“Be fearful when others are greedy. Be greedy when others are fearful.”
-Warren Buffett
