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10 Apr 2024  (1960 Views) 
Tan Kin Lian - Perspectives

Review of Nvidia (NVDA).
I do not have any shares in Nvidia. 

The stock was at $267 a year ago. It increased 3.5 times to $942 at the peak in March 18 and has dropped 10% since to $853. 

At the current price, the PE ratio is 71.43 times. It is too high, and can only be justified if the business continue to achieve high growth for the next few years due to the AI boom. 

The financial results for the latest year showed a revenue increase of 2.2 times and a net earnings increase of 6.9 times. Can this business continue its high growth?

My view is that the stock is over valued for the following two reasons

a) The demand for chips required for AI computation will not be sustained. Many corporations will find that their investment in AI computation is not paying a return. They will cut back on this demand. 

b) Other chip manufacturers will be able to provide competitive products and take part of the growth from Nvidia. 

I believe that the stock price of Nvidia will continue its decline to a realistic level. My guess is that it will be half of its peak of $940. This is my guess. I may be wrong. 

Tan Kin Lian 


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