Nvidia euphoria: Stock is a little bit ahead of itself, doesn’t have the revenues, Dory Wiley says
As an expert crypto analyst, you may be wondering about the current investing environment and the recent moves in the crypto market. One notable trend is the surge in Nvidia and the broader AI industry, as well as the increasing popularity of Bitcoin. However, it is important to analyze these movements and evaluate the environment we find ourselves in.
There is a new mindset in the market today, where investors are advised to allocate their investments to the big seven or “magnificent seven,” which includes companies like Tesla and Nvidia. These investments have been profitable so far, but there is a sense of euphoria surrounding Nvidia and the AI industry. It is crucial to identify the reasons behind this euphoria and assess its sustainability.
Nvidia, known for supplying AI technology to various industries, has been highly successful and profitable. With its accelerated computing capabilities and advancements in AI, the company has a massive margin and is involved in multiple sectors. However, there are other stocks in the market, such as SoundHound and Bear AI, that also show signs of euphoria. Despite their promising products and potential, their market caps are significantly higher than their revenues, indicating a discrepancy between their valuations and fundamentals.
This raises the question of whether this euphoria is sustainable, especially considering the historical implications of such market sentiment. For example, the infamous “irrational exuberance” speech by Alan Greenspan in February 1996 marked the beginning of a four-year bubble that eventually burst. Although the current situation is different, with the euphoria lasting for a shorter period, it is still crucial to consider the consequences of speculative trading.
So, in this market, should you chase these investments and participate in the rally, or should you be cautious and avoid the euphoria? The key lies in finding a balance between participating and minimizing risk. As a crypto analyst, it is advisable to under-allocate investments to the magnificient seven and analyze the fundamental reasons behind each investment decision. However, there are a few favorites, such as Nvidia and Microsoft, that continue to show significant potential due to their massive market presence, high margins, and estimated earnings and revenues growth.
If a correction occurs and these stocks drop by 20%, it could be an opportunity to shake off some of the euphoria and still hold onto quality stocks. It is essential to have a strategy that takes into account both the potential profits and the risks associated with speculative trading.
Apart from the euphoria surrounding individual stocks, it is vital to consider the impact of economic data, particularly inflation data, on the overall market. The release of the preferred inflation gauge by J Powell, the Chairman of the Federal Reserve, can have a significant impact. However, it is worth noting that Powell and other Fed officials have expressed skepticism about the accuracy of inflation and unemployment data. Therefore, any knee-jerk reactions or changes in statements are unlikely at this time.
The consensus among experts is that the economy will perform well this year, with strong GDP growth exceeding expectations. However, it is crucial to balance this positive outlook with market expectations of rate cuts. It is a common misconception that rate cuts are necessary for the market to thrive. In reality, the market can still flourish with stable interest rates. The focus should be on the overall economic growth rather than relying solely on rate cuts as a catalyst.
In conclusion, as a crypto enthusiast, it is important to carefully analyze the current investing environment and the euphoria surrounding certain stocks in the AI industry. By evaluating the fundamental reasons behind investments and considering the impact of economic data, you can make informed decisions and minimize risks. Remember to strike a balance between participating in the rally and avoiding speculative trading.
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