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Nvidia (NASDAQ:NVDA) stock is on a rocket ride today, but be careful, as the euphoric sentiment likely won’t last forever. I am neutral on NVDA stock because Nvidia’s Fiscal Q1-2024 results weren’t as great as some folks might assume they are. Plus, the company’s current-quarter sales guidance sets a high bar that Nvidia will now have to clear.
Nvidia is a chip giant that’s known for manufacturing graphics processing units (GPUs) for video game consoles. However, people are strongly focused on machine learning in 2023. Investors are highly interested in Nvidia this year because the company makes hardware components that power applications for generative artificial intelligence (AI).
As we’ll discover, Nvidia is riding high on the AI trend, and analysts are taking note of this. Yet, it may be time to exercise caution as NVDA stock goes vertical, and some analysts’ price targets bake a great deal of future growth into the cake.
NVDA Stock Goes from Steep Rise to Absolutely Vertical
In times like this, financial traders have to keep a cool head and avoid headline hype. That’s easier said than done when everybody is bullish on Nvidia and when NVDA stock gained 24.35% in a single trading session today.
It’s fine to be bullish on Nvidia, but the market’s sentiment has crossed the line into utter euphoria now. The news sentiment surrounding Nvidia is almost entirely positive, and bloggers are mostly bullish on NVDA stock. Furthermore, the crowd wisdom indicator on Nvidia is strongly positive. These are important factors to monitor, as they could actually be used as contrarian indicators to gauge how people feel about a particular company and stock.
Meanwhile, Nvidia stock bounced from its October 2022 low of around $112 to nearly $395 earlier today. Certainly, the stock can go higher and I wouldn’t dare to make a bearish call on Nvidia. I’ll admit, it probably won’t be long before Nvidia’s market cap hits $1 trillion (currently near $940 billion), at which point more bandwagon-jumping traders will likely start buying the stock.
Just remember that vertical share price moves can stretch a company’s valuation. In the case of Nvidia, its GAAP trailing 12-month price-to-earnings (P/E) ratio of over 175.5x is substantially higher than the sector median of 23.6x. Nvidia’s trailing price-to-book (P/B) and price-to-sales (P/S) ratios are also far above their sector medians.
The problem is that many…
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