Is Nvidia a Buy? Is NVDA Overvalued?

Is Nvidia a buy, or is NVDA overvalued? Over the past 3 months, Nvidia stock has more than doubled in price. When considering the best stocks to buy, NVDA stock might be at the top of your list. But Nvidia stock analysis and Nvidia stock predictions bring into question the current Nvidia stock valuation. So is NVDA stock a buy? With an expected Nvidia stock split coming, the Nvidia price prediction might produce a higher NVDA stock valuation that you think. After viewing this NVDA stock analysis, you will have an answer to the question, “Is Nvidia stock a buy?”

After Nvidia’s massive 300% growth over the past year, and 100% double up just in the first three months of 2024 alone, is Nvidia stock a buy, or is NVDA overvalued? Well, we’re going to take a look at the growth prospects on Nvidia. We’re going to look at their new chips coming out, the future growth of AI, we’re going to take a look at Nvidia’s fundamental analysis, as well as the technical analysis on the stock, to try to come up with a fair valuation. I’m going to give you both my short term and long term prices on Nvidia, and then you can let me know in the comments below whether you think I am an informed investor or a complete idiot. But do watch the entire video before commenting. That way you can be an informed commenter. For those of you who are new to this channel, my name is Stock Curry. I’m a former Merrill Lynch and Morgan Stanley investment banker, and I’ve been trading for over 25 years.

Before we take a look at some of the fundamentals behind Nvidia stock and the company itself, let’s take a look at investor sentiment to see how investors feel about Nvidia stock. Philippe says there’s no way Nvidia goes to $500; instead, Nvidia is going to $1,500. Greg says it will not be leveling off, and Nvidia is too far ahead of the competition in its ecosystem and is not letting up on the momentum. But Stuart says LOL to all of these people that think Nvidia is just going to keep going up forever, that’s why y’all will be left holding the bag. But Lee Allison takes a more bullish approach, saying historically, Nvidia has sold high end graphics cards, but now Nvidia is the best in class AI card manufacturer. Demand is unprecedented, and this may not die down until a competitor comes into the space. Lee Allison says a fair price on Nvidia is around $1,500.

And Albert says Nvidia is years ahead of the competition and keeps innovating on its chips. Albert expects Nvidia to hit $1,200 by the end of this year, and $1,850 by the end of next year. Derek recognizes that the forward PE ratio on Nvidia is far too high right now, but says it’s going to take years for NVDA to normalize its PE. Derek says Nvidia is not a short, and to wait till around $1,200 to $1,400 before selling. Albert responded by saying that he would love to see Nvidia fall to $500, but says that’s a pipe dream, and he does not see Nvidia getting below $820. But Muhammad thinks $500 is possible, saying that people are bringing forward multiple years of earnings into the current price.

What’s clear is that while there are some people who think Nvidia is overvalued, the vast majority of people are extremely bullish on Nvidia, and for good reason. The short term technicals clearly show Nvidia continuing to go up over the next few months, and I’ll give you a few price targets a little bit later in this video. But one thing that you should be aware of is that the long term fundamental valuation on Nvidia doesn’t look nearly as good as the short term price targets do.

At the current valuation, with a forward PE ratio of 39, Nvidia would have to grow by 25% per year every single year, for the next 15 years in a row. Now it’s up to you to decide if that’s reasonable or not. Only one company in history has ever been able to pull that off, and that was Apple from 2007 to 2021 after they released their iPhone. Apple stock rose a massive 7,000% during those 15 years. But to be fair, that does include Apple bottoming out during the Great Financial Crisis, and rising into one of the strongest bull markets in recent history in 2021.

Nvidia, on the other hand, is already pricing in that growth. NVDA has already risen 18,000% over the past 9 years, more than doubling the performance of Apple. Nvidia’s current growth prospects are based on their increasingly powerful AI chips, such as their upcoming Blackwell B200 chip, and increasing demand for their AI chips. Nvidia has the first mover advantage and a near monopoly in the AI chip space, and that’s why Nvidia stock is currently pricing in a 25% annual growth rate over the next 15 years. But Nvidia will face increasing competition as the years go by. As competition ramps up, Nvidia will be forced to lower their profit margins in order to stay competitive. And we all saw what happened to Tesla when they started to lower their profit margins.

Nvidia’s growth rate will have to slow down. Nvidia cannot maintain a 300% annual growth rate like they did over the past few quarters. If they did, they would eventually exceed the GDP of the entire world, and that’s obviously not going to happen. So their growth rate will slow down. Nvidia is facing just one more quarter of insane growth before they have to start comping against much higher earnings from a year prior. That means their growth will slow significantly starting in Q2, and significantly further in Q3 of this year. And that is going to make it very unlikely that Nvidia can pull off an annual 25% growth rate every year for the next 15 years.

But even if Nvidia can pull that off, the stock would only go up by 10% per year each year for the next 15 years, given the current valuation on Nvidia stock. And at that point, you’re really only matching the overall stock market. You’re not even beating it. You might as well have your money in a stock like VOO or SPY. The only way for Nvidia stock to exceed 10% per year, is for Nvidia’s growth to exceed 25% each year for the next 15 years.

Back in 2021, people thought Tesla could pull off an annual growth rate of 50% every year for the next 10 years. Way back in its Q4 2020 earnings call, Tesla touted a long term delivery CARG of 50%, with CEO Elon Musk stressing, “We do think that we can maintain a growth rate in excess of 50% per year for many years to come.” But here we are just three years later, and it’s been proven that those extremely bullish growth rates were completely unreasonable. The company’s deliveries did rise by over 50% in 2021, as Tesla has predicted. But in 2022, its growth rate slowed to around 40%. Last year, Tesla’s deliveries rose only 38%, and Musk effectively withdrew the 50% guidance.

The problem is, once competition and market saturation starts, the growth rate of a company slows significantly. And that is why it is highly unlikely that Nvidia will actually achieve a 25% year over year growth in their profits. As a result, Nvidia’s stock price is significantly higher than it should be right now. Nvidia’s stock price has risen on the back of unrealistic growth expectations and speculative hype. Once that speculative hype comes down and people start pricing in more realistic growth expectations, Nvidia’s stock price will most likely fall as well.

Using realistic growth expectations as well as data we’ve had from past companies who had first mover advantages, such as Apple and Tesla, we can see that the fair value on Nvidia stock is currently much lower than the current share price. Nvidia’s current stock price should be trading between $300 to $565, depending upon which growth forecast you look at. Now, I’m not saying Nvidia stock price will ever fall that low. It could be years before the speculative hype on Nvidia dies down, and by that time, the fair valuation on Nvidia might be closer to $700 or $800.

For a short term trade, Nvidia remains a buy based upon the current investor sentiment, market momentum, and technical analysis. Technically, NVDA is forming a bull flag, which is bullish and indicates a continued upside movement. The Fibonacci sequence shows NVDA is likely to rise to $1,175 soon, and possibly as high as $1,900 by the end of this year, so long as investor sentiment remains extremely bullish.

But for a long term investment, Nvidia is currently overvalued, and will most likely have a pullback at some point in the future. So buying Nvidia for a long term hold at the current prices is most likely going to result in you losing money. And there are far better long term investment opportunities in the market right now than buying a stock that has already risen over 300% over the past year, and is currently pricing in a nearly impossible 25% annual growth rate over the next 15 years.

If I were looking to buy Nvidia for a long term hold, I would be looking to buy Nvidia under $600 in 2024, under $700 in 2025, and under $800 in 2026. Because stocks do not go up in straight lines forever, and because stocks have multiple pullbacks and corrections every year, I think the likelihood of buying NVDA at those prices is very high. Successful long term investors know that making money in the stock market is a game of patience. And right now, given the exuberant valuation on Nvidia stock, long term investors are best off being patient and waiting for a pullback before buying into the stock. But short term traders will very likely make money buying Nvidia stock at the current price, and then selling it somewhere between $1,200 and $1,900.

So let me know in the comments below if you think I’m an informed investor, or if I’m a complete idiot, and let me know in the comments below what your price targets are on an Nvidia stock.

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