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🚀 Riding Nvidia's 206% Rally: Is It Time to Sell or Invest More?

🚀 Riding Nvidia's 206% Rally: Is It Time to Sell or Invest More?

Expert Tips on Nvidia's Next Moves

Market Maverick & Market Maverick
June 21, 2024

As an experienced investor, it's crucial to stay ahead of the curve and understand the dynamics of the stocks in your portfolio. Let's dive into Nvidia Corp (NVDA.O), a company that has captured the market's attention with its phenomenal performance.

Nvidia has been on a tear, with its shares skyrocketing 206% over the last 12 months. This surge has led Nvidia to briefly become the largest U.S. company by market value, thanks to a more than 1,000% increase in share price since October 2022. In 2024 alone, the stock is up 164%, pushing its market value to over $3.2 trillion and momentarily surpassing giants like Microsoft and Apple.

The company's leadership in AI-chip technology is a significant driver of this growth. Nvidia's dominance in providing chips for artificial intelligence applications positions it at the forefront of a massive technological shift. With revenues expected to double to $120 billion this fiscal year and rise to $160 billion the next, the outlook appears robust. For comparison, Microsoft's revenue growth is projected at about 16% for its fiscal year.

Despite its impressive performance, Nvidia's forward price-to-earnings ratio has risen by 80% this year, making the stock more richly valued and potentially vulnerable to sharp pullbacks when bad news hits. As Chuck Carlson, CEO of Horizon Investment Services, wisely points out, past performance shouldn't solely drive investment decisions, but the momentum is hard to ignore.

Ivana Delevska, founder of Spear Invest, remains bullish on Nvidia, highlighting its solid earnings support and potential for upside beyond Wall Street forecasts. Nvidia is the top holding in the Spear Alpha ETF at nearly 14% of the fund. Similarly, Tom Plumb of Plumb Funds emphasizes the underappreciated opportunities for Nvidia's chips beyond AI, underscoring the importance of data and access facilitated by Nvidia's high-performance chips.

However, caution is warranted. Analysts like Gil Luria from D.A. Davidson express concerns about Nvidia's ability to sustain its current performance in the long term, citing a "neutral" rating and a $90 price target against the stock's recent price of $130.78. Additionally, Stanley Druckenmiller, a billionaire investor, has reduced his position in Nvidia, noting that while AI might be overhyped in the short term, it remains underhyped in the long term.

Looking ahead, competition from tech giants like Microsoft, Meta Platforms, and Alphabet could challenge Nvidia's market-leading position. Morningstar analysts predict that leading vendors may eventually seek to diversify their supplier base, potentially limiting Nvidia’s upside.

In summary, Nvidia presents a fascinating case study of high reward balanced by high risk. For those considering whether to cash in or double down, it’s essential to weigh the impressive gains against the potential for increased volatility and competition. Always keep a close eye on market trends and be prepared to adjust your strategy accordingly.