To The Moon

Nvidia and its founder, Jensen Huang, have become the center of attention lately. The rise of AI has greatly favored Nvidia, resulting in the company being valued at nearly a trillion dollars.

The media has increasingly focused on Huang, and recently, he traveled to Taiwan to deliver a commencement speech, which gained significant traction on social media. Even during his casual stroll through the night market in Taiwan, he was recognized, photographed and celebrated.

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While this widespread adoration is remarkable, it poses a potential risk for investors in Nvidia. Historically, such overwhelming admiration often indicates that the peak of the company's share price is either imminent or has already passed.

Based on my observations and the findings of analysts, there is a phenomenon known as the "magazine cover curse." Essentially, when a person or company is featured in a positive cover story, it often signifies the end of its exceptional results. Following the cover story, the company tends to revert back to the average or typical performance.

I recall watching an interview with him and David Rubenstein, where Son mentioned that he briefly held the title of the richest person in the world for three days. This occurred when SoftBank's stock price surged before the Dotcom bubble burst, resulting in a subsequent crash that wiped out his net worth.

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I watched this interview a few years ago, which seemed to mark the second peak of Son's career. It caught my attention because SoftBank was one of the most prominent venture capital firms at the time. With an initial capital of over $100 billion, SoftBank's Vision Fund became the largest technology-focused venture capital fund globally. Notably, sovereign wealth funds were among the fund's investors. Son proudly mentioned that he secured a $45 billion investment from Saudi Arabia in just 45 minutes, equivalent to $1 billion per minute.

Leveraging his success as an early investor in Alibaba, SoftBank made strategic investments in numerous tech companies that eventually became industry giants. These included Didi, Uber, WeWork, Grab, Slack, Bytedance, Flipkart, FTX, and more. SoftBank's returns soared alongside the skyrocketing valuations of these companies during the peak of the technology boom.

However, as we all know, the tech industry suffered a significant setback when interest rates were raised in 2022. This led to a crash in tech company valuations, causing SoftBank to lose approximately $30 billion in the fiscal year 2022 and Son still owe more than $5 billion to SoftBank because of his side deals.

The same narrative applies to Cathie Wood, who was once highly admired for her investing prowess in selecting disruptive companies. Achieving over 100% return in a single year without leveraging was an extraordinary feat for an ETF. Wood accomplished this with Ark, delivering a remarkable 152% return in 2020 and swiftly accumulating billions of dollars in investments. During that period, many investors proclaimed the death of value investing.

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Regrettably, those who invested in the Ark Innovation ETF in 2020 witnessed losses of 23% and 67% in 2021 and 2022, respectively. While the Ark ETF declined, Warren Buffett's Berkshire Hathaway steadily increased in value and eventually caught up with Ark in less than two years.

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Elon Musk received the prestigious title of Time Magazine's Person of the Year in 2021, a recognition that seemed inevitable considering his notable achievements with Tesla and SpaceX. Tesla emerged as the most successful electric vehicle (EV) company, while their cars became the epitome of style and desirability. SpaceX achieved a significant milestone by becoming the first private company to send astronauts to the International Space Station and demonstrated cost-saving measures through the use of reusable rockets. Their next ambitious endeavor is setting foot on Mars.

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Many marvel at Musk's ability to effectively run two companies simultaneously, a feat that seems superhuman considering the challenges most individuals face when managing just one enterprise. He has garnered a devoted following, with a substantial number of Twitter followers, and is regarded as a visionary leader capable of transforming the world—a hero to many.

In 2021, Tesla's stock soared, gaining an impressive 50%, propelling Elon Musk to the top of Forbes' richest individuals list in 2022. However, in hindsight, we now know that Tesla's share price peaked at $381.59 in November 2021, just a month prior to Musk being named Person of the Year.

Unfortunately, 2022 proved to be a challenging year for Tesla investors, as the stock experienced a significant decline of 65%, marking its largest annual drop in history.

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Bernard Arnault, the mastermind behind LVMH, garnered widespread media attention when he ascended to the title of the world's richest man. The pinnacle of this achievement likely occurred around April 2023 when Forbes published its annual billionaire ranking, with Arnault surpassing Musk to claim the top spot.

However, just a month later, LVMH's share price experienced a decline, resulting in a significant 5% drop in a single day. This unfortunate turn of events caused Arnault to suffer an $11 billion reduction in his net worth. Although he still retains his position as the richest individual globally, investors who purchased LVMH shares in April would have incurred losses.

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Furthermore, we must address the Forbes cover stories featuring Elizabeth Holmes, Sam Bankman-Fried, and Adam Neumann. In the case of Holmes and Bankman-Fried, their fraudulent activities came to light during their tenure at Theranos and FTX, respectively. On the other hand, Adam Neumann, instead of responsibly managing WeWork, indulged in a lavish lifestyle and was even involved in drug abuse. As a result, Neumann was eventually removed from his position within the company.

Returning to Jensen Huang, he currently holds the spotlight, and it's undeniable that Nvidia is experiencing a period of immense success. The AI frenzy has resulted in a flood of investments pouring into Nvidia, driven by the escalating demand for GPUs and increased computing power essential for competing in the AI industry. However, I have concerns regarding the company's valuation, as it appears overinflated, and there is a concerning level of public adoration. These factors often indicate the presence of a bubble.

Nevertheless, this doesn't necessarily imply that one should take a short position, as the collapse may not occur swiftly. In fact, the stock could continue to rise irrationally. The wisest approach would be to avoid involvement, ensuring a peaceful night's rest and preserving capital.

Let me clarify, I am not criticizing or disparaging these renowned individuals. On the contrary, I believe they deserve recognition and applause for their remarkable achievements. It is undoubtedly challenging to attain such levels of success. However, as investors, it is crucial for us to exercise prudence and refrain from succumbing to the allure of the current hype. Public adoration often comes with a premium and we must remain cautious. We must be mindful that this adoration can fade, potentially leading to a decline in share prices.

Perhaps investors can consider adopting a contrarian approach, buying when the media mocks or publishes negative news about certain persons and their companies. Such coverage could potentially indicate that the stock has reached a bottom or is nearing one. However, it is crucial to exercise caution and conduct thorough due diligence to ensure that these companies are not involved in fraudulent activities. Taking a contrarian stance can be a strategy worth exploring.