Opinions
Larry Berman CFA, CMT, CTA
NVIDIA Corporation
NVDA-Q
COMMENT
Mar 17, 2025
Stock price when the opinion was issued
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A solid hold. Demand for their chips is not going anywhere, peers can't catch up and their technology remains advanced. Earnings are following the stock price. Accumulate this carefully on pullbacks, like now. The PE is not low, can be volatile, so don't buy a full position just yet.
Chip business is cyclical. The downslide can be precipitated by overstocking due to high demand, and that inventory has to be worked through. China has now decided it doesn't need the H20 chip, so all that inventory is now in the supply channel.
When you're paying a high price for these companies, your expectations are for sunny days. But you have to plan for the rainy ones.
It may appear that Nvidia is investing in hardware ($100 billion in OpenAI), but really they are financing the purchase of their own equipment. The market responded by pushing the stock back to record highs where it remain slightly under that. Will this mean NVDA will break out to new highs or are existing shareholders selling? Take some money off the table. He likes AI for the long term, but the market is ahead of itself now.
Only trading at 28x for 2027. Growing visibly in high 20s-low 30s. Only problem is if growth starts to slow. At what point do people jump ship? These are cyclical companies. The difference between being super-successful and not executing well can be by a factor of 10, as that's how exaggerated moves can be.
If demand really slows, look out below. Concerns of over-building in AI, might not all be needed, and we don't know for sure. The people saying that we need all this AI demand are the ones benefitting from the rising stock prices. The average of the 50 analysts who cover it are saying it can grow 27%. Still a good deal if what they're saying is true.
Trading at the top. If you already own it, he'd sell some calls, not to get called away but to earn some premiums. If you want to buy some more, you could sell some puts. If those puts work out, then you'll have bought lower than it is right now. Everyone should own some in their top 10 holdings.
What's important today is that they have a big conference this week. On a 1-year chart, you can see for the last 3-4 months that it's been chopping around, not doing much of anything. While that's not bearish, it's certainly not bullish.
To get to the next leg up, it'll take even better news than the market's expecting. DeepSeek indicated that maybe we don't need as many of these chips as we think we do. INTC is a turnaround story. Lots of uncertainty, and it'll take a lot to lift this stock and others.