Is it too late to buy Nvidia stock? Is it too late to buy Palantir stock? It is too late to buy SMCI? The answer to that question depends upon whether you’re looking to buy these stocks as long term holds, or if you just looking to trade options on these stocks. The top stocks to buy now for a short term trade might just be NVDA, PLTR, and SMCI. But the best stocks to buy now for a long term hold are definitely not these stocks. So let’s discuss the technical analysis, fundamental analysis, and market psychology of these stocks to show you if it’s too late to get in, and talk about when they might top out and start falling. The stock market is ever changing, and knowing when these stocks might turn around will be crucial to your success trading them.
Over the past few months, stocks like Nvidia have rallied over 700%. Palantir is up over 200% over the past year and a half, and SMCI is up over 1,000% over the past year and a half. I’m Stock Curry, I’m a former Merrill Lynch and Morgan Stanley investment banker, and I’ve been trading for over 25 years. And in my trading experience, I have seen stocks like these rally so many times before.
In order to answer the question of whether or not it’s too late to buy these stocks, I want to take you back to 2021. There happens to be quite a few companies that are reporting earnings this week, and by taking a look at the companies that are reporting earnings this week, and looking at what those stocks did in 2021, this is really going to help you understand what stocks like Nvidia, Palantir and SMCI might do in the future, and whether or not now is too late to get in. This week, we are getting earnings from companies like Nio, CrowdStrike, ChargePoint, JD.com, and EVGo.
Back in 2020 and 2021, NIO rallied rapidly as major EV hype hit the stock market. But eventually, starting in 2021, NIO topped out and it started to fall, and it’s been falling ever since. And today, NIO is down about 90% from its highs, and it’s trading pretty much where it was before the rally ever began. CrowdStrike is another stock that’s reporting earnings this week, and back in 2020 and 2021 it also had a rally before selling off and getting back down to where it was prior to its rally. Of course, CrowdStrike has recovered and has rallied with the most recent AI hype, but is this just going to be a another major top, or is CrowdStrike going to continue to go higher?
Another stock reporting earnings this week is ChargePoint. It also got caught up in the EV hype back in 2020, and it has done nothing but fall ever since those highs; now trading well below where it was during the EV hype. JD is another company reporting earnings this week. And as you can see, it also ran up in 2020 and 2021 before selling off and getting back down to where it was trading at prior to its rally. And EVGO is another EV stock that got caught up in the rally in 2021, but has since sold off and is trading well below where it was prior to the EV rally.
What you’ll notice in all of these stocks that are reporting earnings this week, is they all ran up during that EV hype cycle back in 2020 and 2021, and they all eventually, over a 2 or 3 year period, came crashing back down and fell back down to where they were trading prior to the EV hype cycle. And this is what we are most likely going to see with a lot of the AI stocks, but not all of them. Some of the stocks, like CrowdStrike did, they might turn around and start going back up again. But most of the AI stocks will fall back down to reality over the next 2 to 3 years. This is something that we’ve got to watch out for, because it’s most likely going to happen.
What might cause an eventual fall on these stocks? Well, quite simply, it’s the fundamental valuations. You see, stocks in the stock market will generally trade at a forward PE ratio of around 15. Technology stocks will very often trade at a forward PE ratio of around 20. But if we look at the forward PE ratio on Nvidia, it’s currently at 66, which means Nvidia is trading at more than three times its fair valuation. Palantir is trading at a forward PE ratio of 74, nearly four times its fair valuation, and SMCI – the most reasonable of the bunch – is trading at a forward PE ratio of 41, more than double its fair valuation. Of course, none of these stocks compare to the most egregious of them all, which is Arm. ARM is trading at a PE ratio of 1,800 and a forward PE ratio of 118, nearly six times its fair valuation.
All of these stocks will eventually fall back down to their fair valuations, meaning all of these stocks are going to face a 50% to 80% decline over the next 2 to 3 years. When that decline starts, nobody knows. But eventually all of these stocks are going to fall back down to fair valuations. And in fact, we’ve already seen a few of the mega-cap tech stocks starting to fall back down to fair valuations. Apple has already had a pretty significant decline this year, falling below a major support level on Friday. Apple’s forward PE ratio is at 27, still leaving the stock slightly overvalued. Google has also fallen, and it is now back down to a fair valuation. Google’s forward PE ratio is at 20.3 for now, making Google fairly valued, and that forward PE ratio of around 20 is what I would expect all of these AI stocks to eventually get back down to. The question is a matter of timing.
Will these stocks continue to go up in the short term, or is this the top now? I think I’ve pretty clearly established already that none of these stocks would make a great long term hold. Is it too late to buy Nvidia or Palantir or SMCI for a long time hold? Absolutely. It is way too late. The time to buy all of these stocks would have been in 2022, when they were selling off like crazy. It is way too late to buy these stocks for a long time hold. But is it too late to buy them for short term trade? Will they continue to go up over the next month, or two, or even three months? And to answer that question, we really have to look at market psychology, because ultimately, the reason these stocks are running up so much is not the fundamentals, but rather the psychology of the overall market.
Right now, there’s a lot of AI hype in the market, and people are buying the stocks at any price just because they think they’re going to keep going up. Anything that has anything to do with AI is running up like crazy right now. So what is the market psychology looking like right now? Is the market still bullish? Will it remain bullish? Well, if we take a look at the CNN Fear and Greed Index, it is sitting solidly in the extreme greed stage at 77 out of 100. And this indicates that the overall market is extremely bullish, and will probably remain bullish for the next couple of weeks or even months. So in the short term, these stocks do look like they’re going to continue to rise. Nvidia, Palantir, and SMCI are probably all going to continue to rise over the next 1 to 3 months.
But the real question is, “When will they top out and start going back down?” And the best way to answer that, even though nobody really knows for sure, is to take another look at market psychology and investor sentiment. And I think the best way to do that is actually to look at Wall Street Bets. The reason I like to look at Wall Street Bets to gauge market sentiment, is because Wall Street Bets is a major community of retail traders, and what they post can give you a really good idea as far as how bullish or bearish people are on the stock. And right now, the biggest thing I’m seeing on Wall Street Bets is massive bullishness for Nvidia, such as this post here, as well as this post here, all showing the major gains people got for Nvidia and everybody saying they’re going to continue to buy Nvidia. So Wall Street Bets makes it very clear that people remain extremely bullish on Nvidia, as well as the other stocks. And for that reason alone, these stocks are probably going to continue to rise, at least in the short term.
What you want to watch out for are more and more posts that are bearish, such as this post here on Wall Street Bets, where somebody is buying puts on SMCI. Now, the reason SMCI is the only stock on Wall Street Bets that people are bearish on right now, is because SMCI just got added to the S&P 500. And historically, being added to the S&P 500 is a buy the hype, sell the news event. For that reason, a lot of people think that SMCI is going to sell off this week, and a lot of people think that weekly put options on SMCI are probably the way to go for a short term trade. But it looks like Nvidia and Palantir are still bullish, and they’ll continue to rise on the short term.
SMCI might have a sell off this week, but longer term, it still appears to be extremely bullish. So for a long term hold, is it too late to buy? Yes, absolutely. The time to buy these for a long time hold was years ago – in 2022. For a short term trade, is it too late to buy these stocks? No, I don’t think so. I don’t think it’s too late to get in. I do think that all three of these stocks will continue to rise over the next 1 to 3 months, even though SMCI might have a small pullback. And I do think all of these stocks could be extremely profitable for anybody that wants to trade them. Just don’t hold them too long, because eventually they’re all going to come crashing back down to reality.
Now, if you want to know what I’m buying and selling, you can join me in my discord where I’ve made over $20,000 in the first two months of this year. I did that on a $10,000 portfolio. That is a 200% profit in my portfolio in just two months. So if you want to know everything I’m buying and selling, come join me in my discord.