5 ms·

Is it always about earnings? The market is all about speculation and trust. Unless a competitor obliterates them, I don't see their stock tanking more than 10%.

Is it always about earnings? The market is all about speculation and trust. Unless a competitor obliterates them, I don't see their stock tanking more than 10%. Look at Apple, Google, or even Boeing. Boeing's doors are flying off the planes yet their stock is still higher than October 2023 crash. Nvidia can just go for a stock split and take care of the numbers quickly.

FredPret 3y ago
It's about earnings (freshly made money) and equity (existing money) and growth potential (future money). One way or another, they need to have money in order to distribute it to me, the investor (through dividends or buybacks). At a valuation of 90x earnings and only $0.02 in equity per dollar of market cap, I have to pay an insane premium to acquire: - an anemic stockpile of equity ($50b in assets - $22b in liabilities = $28b in equity. Yours for only $1500b!) - a tiny cashflow of 1/90 of my investment - admittedly big growth potential So the question is - how big is that growth potential? I bet it's not high enough to justify 90x earnings.
- system2 3y ago
  Unrelated question: Do you have any stocks you are following and expecting to go high soon?
  - FredPret 3y ago
    I'm always careful to calibrate my expectations to "one day far in the future this might work" versus expecting highs soon. I recently exited positions in US Steel and Encore Wire which were selling for single-digit PE ratios and with >$1 equity per $1 market cap at the time. My plan was to hold them forever, but the price just shot up so much and there are other things to buy. I like really boring businesses like banks, utilities, airlines that can trudge along for decades if they have to before I get my return. When you catch them in a bad news cycle, you can pick up a solid business for less than it's worth.
  - __loam 3y ago
    Don't take financial advice from hacker news. Go to the bogleheads wiki, get a handle on your personal finances, then invest using a standard 3 fund spread in index funds. Picking individual stocks is just gambling.
    - FredPret 3y ago
      This is great advice for most. But the more people who do this, the more overvalued the indexes will become, and the more capital-starved the non-index companies will become (even though they are still very good businesses!).
      - __loam 3y ago
        Don't hate the player, hate the game.
        FredPret 3y ago
        I’m not saying you’re wrong or should do it my way! Just explaining why I’m taking the road less travelled.
    - saberience 3y ago
      Don't take this advice unless you want massively subpar returns. The idea that picking individual companies is "gambling" is quite frankly ridiculous. The information around NVidia being a great company has been around for years and years and was obvious to anyone who took a look at the company performance. The same is true for companies like Netflix or Shopify. I invested in all three of the these companies for the first time in around 2013 and 2014, why? Because I did my research and due diligence and could see they were incredibly well run, operating in areas with lots of room for growth. If I had just invested in index funds I would much, much less money than I do now. If you're reading this comment and you're younger than 60, do not take this advice. Your risk tolerance should be higher when you're younger and buying good companies at good prices is not gambling, it's what Warren Buffet always did, and it's the best way to grow your net worth.
HDThoreaun 3y ago
At the end of the day GPU copmpute is a commodity. I just cant see how nvdia has differentiated itself in a way that will last a decade plus. Theres too much money on the line for every competitor to be asleep at the wheel here. Eventually a competitor will have a compelling product and then nvdia will have to slash prices.

FredPret 3y ago

It's about earnings (freshly made money) and equity (existing money) and growth potential (future money). One way or another, they need to have money in order to distribute it to me, the investor (through dividends or buybacks). At a valuation of 90x earnings and only $0.02 in equity per dollar of market cap, I have to pay an insane premium to acquire: - an anemic stockpile of equity ($50b in assets - $22b in liabilities = $28b in equity. Yours for only $1500b!) - a tiny cashflow of 1/90 of my investment - admittedly big growth potential So the question is - how big is that growth potential? I bet it's not high enough to justify 90x earnings.

system2 3y ago
Unrelated question: Do you have any stocks you are following and expecting to go high soon?
- FredPret 3y ago
  I'm always careful to calibrate my expectations to "one day far in the future this might work" versus expecting highs soon. I recently exited positions in US Steel and Encore Wire which were selling for single-digit PE ratios and with >$1 equity per $1 market cap at the time. My plan was to hold them forever, but the price just shot up so much and there are other things to buy. I like really boring businesses like banks, utilities, airlines that can trudge along for decades if they have to before I get my return. When you catch them in a bad news cycle, you can pick up a solid business for less than it's worth.
- __loam 3y ago
  Don't take financial advice from hacker news. Go to the bogleheads wiki, get a handle on your personal finances, then invest using a standard 3 fund spread in index funds. Picking individual stocks is just gambling.
  - FredPret 3y ago
    This is great advice for most. But the more people who do this, the more overvalued the indexes will become, and the more capital-starved the non-index companies will become (even though they are still very good businesses!).
    - __loam 3y ago
      Don't hate the player, hate the game.
      - FredPret 3y ago
        I’m not saying you’re wrong or should do it my way! Just explaining why I’m taking the road less travelled.
  - saberience 3y ago
    Don't take this advice unless you want massively subpar returns. The idea that picking individual companies is "gambling" is quite frankly ridiculous. The information around NVidia being a great company has been around for years and years and was obvious to anyone who took a look at the company performance. The same is true for companies like Netflix or Shopify. I invested in all three of the these companies for the first time in around 2013 and 2014, why? Because I did my research and due diligence and could see they were incredibly well run, operating in areas with lots of room for growth. If I had just invested in index funds I would much, much less money than I do now. If you're reading this comment and you're younger than 60, do not take this advice. Your risk tolerance should be higher when you're younger and buying good companies at good prices is not gambling, it's what Warren Buffet always did, and it's the best way to grow your net worth.

HDThoreaun 3y ago

At the end of the day GPU copmpute is a commodity. I just cant see how nvdia has differentiated itself in a way that will last a decade plus. Theres too much money on the line for every competitor to be asleep at the wheel here. Eventually a competitor will have a compelling product and then nvdia will have to slash prices.