NVIDIA (NVDA) is now the most extreme story I’ve seen among large company stocks in at least 20 years, with the possible exception of Tesla (TSLA). I’m going to dig into this for a long time today, so if you can’t tolerate any more NVDA blather you might want to scroll down a bit…
Yes, there has been wild trading since COVID in all kinds of stocks, and insane valuations sometimes hit for those “story” stocks and “meme” stocks that really catch the attention of day traders (EVs, LiDAR, you name it…), but almost never have we seen a megacap company, one of the largest companies in the history of the world, trade at a valuation like this… or make a move like NVIDIA made on Thursday morning.
There have been huge surprises that got fairly close, like with Google (now Alphabet (GOOG)) in its first quarter or two after going public, when we collectively began to realize just how much money they could make with the brilliant scalability of their search ads… or with Facebook (now Meta (META)), when they figured out their mobile app about a decade ago… or, yes, Tesla, when they started to actually deliver cars and make a little money to pour rocket fuel onto what was already a “saving the world” conviction stock for many.
But we’ve never seen anything quite this dramatic, at this size, in this short period of time.
In just a few moments of commentary on their conference call on Wednesday evening, NVIDIA shocked investors of all stripes by doing far more than confirm what everyone knew, that the surge in AI interest among companies was leading to strong demand for its data center chipsets. That emerging growth in AI chip demand was essentially the story that caused NVDA shares to more than double in the first several months of 2023, before this earnings update.
But instead of just confirming that yes, growth is good in their data center business, and better than was expected last quarter, they provided guidance for the next quarter (the one they’re halfway through right now) that completely blew away the analyst forecasts.
Everyone saw demand growing for AI investment and projects, that’s why people have been buying NVDA up to nutty valuations all year… but it turns out we were also all sleepwalking through the speed of the ...