Is Nvidia now the most important share on the planet?

[scotview]

Apparently Nvidia is worth more than the entire USA energy sector. Graphics chips worth more than the stuff that the planet runs on.....doesn't seem right to me.

[ukmtk]

It reminds when me Tesla was worth more than a lot of the other car manufacturers - combined.

[Lootman]

It reminds when me Tesla was worth more than a lot of the other car manufacturers - combined.

Is your assumption that any company worth more than $X must subsequently fall in value?

I would submit that in most cases the companies that were the largest a decade ago are still the largest e.g. Apple, MicroSoft, Google, Amazon, Berkshire etc.

Moreover I do not think that Nvidia is worth more than all the other semi stocks combined. Taiwan Semi, AMD, Micron, Broadcom, Marvell, NXP have all boomed as well. And ARM since its float.

[ukmtk]

Tesla was overpriced for what it was doing. It was the first on the block.
It didn't make sense that it was worth more than a load of companies shipping many more cars (e.g. Toyota).
Nvidia may be different - I don't know - it has fallen from its peak.

[simoan]

Tesla was overpriced for what it was doing. It was the first on the block.
It didn't make sense that it was worth more than a load of companies shipping many more cars (e.g. Toyota).
Nvidia may be different - I don't know - it has fallen from its peak.

This is an idiotic argument. No-one is discussing valuation, only share prices. It is common that when a company is growing as fast as Nvidia that even the most bullish analysts will underestimate the rate of growth. That is what we are seeing. It’s not that unusual. If it keeps growing above trend the valuation still does not seem excessive. However, if it hits a bump the share price will crater. Everyone thinks they will be clever enough to spot that point and sell. In reality, very few will have the discipline to do so.

[ukmtk]

Company X makes wibbles.
In a little over a year its share price has gone from 11.5 to 100 - following a near exponential curve.
A p/e of 85 is no problem - wibbles are now the coolest thing in the world.
Maybe it should start selling tulip bulbs just in case?

[simoan]

Company X makes wibbles.
In a little over a year its share price has gone from 11.5 to 100 - following a near exponential curve.
A p/e of 85 is no problem - wibbles are now the coolest thing in the world.
Maybe it should start selling tulip bulbs just in case?

You’re making the fundamental mistake of looking backwards. Only the future matters in investing. The forward P/E for FY25 for Nvidia is 35. That’s rich but not insane when it is forecast to grow earnings over 90%. A cleverer investor than me called Jim Slater had a valuation metric for growth shares called a PEG. This is the P/E ratio divided by the EPS growth. When that number is less than 1 the share is considered good value. The current PEG for Nvidia is about 0.4.

Of course, there’s lots of hot dumb money in Nvidia and at the first sign of trouble it will be pulled out and the share price will head south fast, but no-one knows when that will be. It’s a well known fact that brokers always under estimate the rise of earnings in high growth companies and over estimate when earnings top out and start to fall. It’s interesting to watch from the sidelines, either way.

[Lootman]

Company X makes wibbles.
In a little over a year its share price has gone from 11.5 to 100 - following a near exponential curve.
A p/e of 85 is no problem - wibbles are now the coolest thing in the world.
Maybe it should start selling tulip bulbs just in case?

You’re making the fundamental mistake of looking backwards. Only the future matters in investing. The forward P/E for FY25 for Nvidia is 35. That’s rich but not insane when it is forecast to grow earnings over 90%. A cleverer investor than me called Jim Slater had a valuation metric for growth shares called a PEG. This is the P/E ratio divided by the EPS growth. When that number is less than 1 the share is considered good value. The current PEG for Nvidia is about 0.4.

Of course, there’s lots of hot dumb money in Nvidia and at the first sign of trouble it will be pulled out and the share price will head south fast, but no-one knows when that will be. It’s a well known fact that brokers always under estimate the rise of earnings in high growth companies and over estimate when earnings top out and start to fall. It’s interesting to watch from the sidelines, either way.

NVDA is down 12% since it got close to $1,000 so that has blown some of the speculative froth off it, and it looks up more than 2% at the open.

Since my cost basis is about $125 I am sanguine about it bouncing around a few percent a day. But whether someone who missed the ride should get in now is another matter. Maybe use options?

Similar things can be said about the other big momentum strategy - anti-obesity drugs. Eli Lilly has been a monster for me, up sixfold in not so much time. But I missed out on Novo Nordisk since it is not a US name, and it feels late now.

[Sorcery]

You’re making the fundamental mistake of looking backwards. Only the future matters in investing. The forward P/E for FY25 for Nvidia is 35. That’s rich but not insane when it is forecast to grow earnings over 90%. A cleverer investor than me called Jim Slater had a valuation metric for growth shares called a PEG. This is the P/E ratio divided by the EPS growth. When that number is less than 1 the share is considered good value. The current PEG for Nvidia is about 0.4.

Of course, there’s lots of hot dumb money in Nvidia and at the first sign of trouble it will be pulled out and the share price will head south fast, but no-one knows when that will be. It’s a well known fact that brokers always under estimate the rise of earnings in high growth companies and over estimate when earnings top out and start to fall. It’s interesting to watch from the sidelines, either way.

NVDA is down 12% since it got close to $1,000 so that has blown some of the speculative froth off it, and it looks up more than 2% at the open.

Since my cost basis is about $125 I am sanguine about it bouncing around a few percent a day. But whether someone who missed the ride should get in now is another matter. Maybe use options?

Similar things can be said about the other big momentum strategy - anti-obesity drugs. Eli Lilly has been a monster for me, up sixfold in not so much time. But I missed out on Novo Nordisk since it is not a US name, and it feels late now.

I will take your word for it that Eli Lilly has gone up six fold. It's true if you have held since Nov 2020. The thing is Novo Nordisk has only gone up 4.5 times in the same period. On a one year graph LLY has still beat Novo Nordisk. Novo is on a more reasonable PE however (it's European). There is a case for investing in both, I think Ozempic and Wegovy from Novo are the market leading drugs for weight loss.