To The Moon

On the meteoric rise of Nvidia Corporation (NASDAQ:NVDA), the artificial intelligence (AI)-linked semiconductor stock, the bugging question remains: Is it overvalued after a 1,634% rise over the past four years? Can the promise of AI deliver the earnings growth expected of the company? Is its position among the mega-cap stocks truly deserved?

⚠️ Trading tips: looking at NVDA calls towards 1000 by next week but best to buy the dip (if any 🤣). It’s Lotto Friday so expect some action from 0dte options traders to pump up the volume. Take only small sizes and don’t give back your week’s gain on a Friday due to greed. Enjoy your weekend 🥂

On its way to 1k mark next week 🎉

The first two questions above will only be answered in hindsight, and the third can only be tackled by comparing Nvidia with a similar-sized company. Apple Inc. (NASDAQ:AAPL) for instance.

Apple has the larger market cap — $2.61 trillion. Nvidia is not far behind, sitting on a valuation of $2.29 trillion.

Apple’s growth has been far more steady. When it launched the iPhone in 2007, its market cap was around $62 billion. A decade later it was $556 billion. Nvidia, by comparison, stayed flat throughout this period with a market cap just above $2 billion.

The following data were compiled by Charlie Bilello, chief market strategist at Creative Planning, which he posted on X on Thursday.

Here are Bilello’s findings:

10 years ago: Apple market cap 47x larger than Nvidia

7 years ago: Apple market cap 13x larger than Nvidia

5 years ago: Apple market cap 9x larger than Nvidia

3 years ago: Apple market cap 7x larger than Nvidia

1 year ago: Apple market cap 4x larger than Nvidia

Today: Apple market cap 1.1x larger than Nvidia

Rocket launched

The above data shows in stark detail — something that percentage moves don’t often convey in words — just how much growth Nvidia’s valuation has gained in just the two months or so of 2024.

At the close on Dec. 29, 2023, Nvidia’s market cap was $1.22 trillion. The means now, at $2.29 trillion, it’s added nearly $1.1 trillion in just 67 days.

Apple took four years to add its most recent trillion.

Isn’t this bubble territory? Analysts don’t think so. Many believe Nvidia warrants this valuation because of its earnings creation and its earnings potential.

Bought the call of the cheaper cousin 

Two days ago, investor and financial TV host featured the stock on his CNBC program saying that given the company’s ability to consistently beat market earnings expectations, its valuation was not excessive.

Meanwhile, it’s become a favored stock of retail investors according to a recent note from Vanda Research with purchases exceeding $1 billion over a 10-day period, compared to just $500 million of Tesla Inc. (NASDAQ:TSLA) shares.

"Trading is about mood and momentum, and when you think mood and momentum, I don't think I have ever seen a company celebrated as much as Nvidia," said Aswath Damodaran, professor of finance at Stern School of Business, New York University, in an interview on CNBC last week.

Damodaran did, however, caution that the pricing may have got a little out of control. Would it suffer the same fate of TSLA, the darling of yesteryears?

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