From Splits to Skepticism: Insights on Nvidia

by | Jun 7, 2024

Yesterday, Jeffry delved into some exciting developments around Nvidia (NVDA).

As NVDA gears up for a stock split on the 10th, Jeffry highlighted how this split, reducing the share price by 90%, is set to create a buzz in the market.

Anyone who owns one share of NVDA before close today will own ten shares at Monday’s open, each at 1/10th of the pre-split price.

Jeffry pointed out that this shift could bring a new wave of traders into the market, eager to take advantage of the lower-priced shares and options.

Nvidia’s market cap remains unaffected by the split, but the reduced share price is likely to make the stock and its options more accessible to a broader range of investors.

Jeffry also noted how Nvidia has already been jockeying for position among the most valuable companies, briefly surpassing Apple to claim the #2 spot before settling back to #3.

But It’s Not All Sunshine And Rainbows

But Jeffry also expressed some criticism of Nvidia.

He pointed out that Nvidia doesn’t produce its own chips; instead, they simply design them and contract with other companies to manufacture them.

He likened it to Boeing hiring someone else to manufacture their planes for them.

Additionally, he said that to justify their current valuation, Nvidia will need to sell billions of GPUs over the next decade and emphasized the challenge in maintaining such a high valuation, considering Nvidia’s lack of a unique offering.

It falls in line with previous comparisons he’s made to DotCom darling, Cisco (CSCO).

Like NVDA has recently done, CSCO went parabolic in the mid-to-late 90s, peaking at a high of $82 per share — and briefly taking the spot of the #1 most valuable company in the world — in 2000.

In the 24 years since the stock peaked, it crashed dramatically — faster than it rose — and has slowly worked its way back up to its current level of $46 per share.

It nearly a quarter century, it hasn’t come anywhere close to approaching its peak market cap and now sits in 73rd place on the list of most valuable companies in the world.

All of this has Jeffry concerned that NVDA could be the CSCO of today.

Back when Cisco was the darling of the DotCom Boom, it could do not wrong. People thought the internet had to run on Cisco. But as the DotCom Bust happened and competitors came out of the woodwork, Cisco’s shine diminished until it was just another stock.

Jeffry feels that while NVDA bulls have proven to be right, this could change as economic conditions change and competitors like Intel (INTC) and AMD (AMD) muscle in on Nvidia’s territory.

For Jeffry’s full commentary insights, catch yesterday’s Morning Monster at 1:40.

And our article from back in March about the Psychology of Irrational Exuberance.

— The Jeffry Turnmire Trading Team


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