Welcome to the 3T club, Nvidia.
3T here stands for the exclusive elite of public companies that have achieved the magical $3 trillion in market capitalisation. Only two other companies have attained this significant milestone: Apple (AAPL) and Microsoft (MSFT). These days, even other big tech like Google (GOOG) and Amazon (AMZN) are $1 trillion smaller than Nvidia. And Tesla (TSLA)? Its market cap of $558 billion is now “only” worth 19 percent of Nvidia’s. Given Nvidia’s hyper bull run, it is only a matter of time that it topples MSFT to be the world’s largest company.
To be fair, two years ago very few investors would have anticipated this stunning turnaround for the California-based chip-maker. The post-pandemic market bubble was deflating, dragging most tech stocks down with it. Nvidia lost two-thirds of its market capitalisation as its stock price crashed from $330 to $100.
The sudden emergence of ChatGPT, however, revolutionised the sector. Immediately, most technology companies realised that generative AI was a game changer for the industry. Underpinning this transformation are computer chips used to train the generative models. With the benefit of hindsight, late 2022 was the best time to buy NVDA.
After a 12x rally (in 18 months), is it still too late to chase? From a risk-reward point of view, the answer is yes. A stock, no matter how fast its revenue/EPS is growing, can’t go up forever. Sooner or later, it will hit some barriers. Nvidia’s stock prices are now rocketing in a near-vertical straight line; its market cap is expanding uncontrollably.
Does it remind you of other bull market episodes? Not so long ago, during the pandemic in 2020, Zoom (ZM), Peloton (PTON), Tesla (TSLA) – experienced this mad dash to corporate greatness. But they all deflated massively later. Bulls of Nvidia will, of course, point out to you and me that ‘this time is different’. AI is here to stay; Nvidia’s revenue is rocketing. Nothing to worry about.
True. But again that’s what they say about DotCom stocks in the nineties too.
Anyway, for momentum traders NVDA is a perfect stock to trade right now because its upside momentum is very strong. Another 20-30 percent rally from here is a distinct possibility. Who knows, Nvidia could be the first company to attain the 5T milestone.
Crude Oil slipping towards $70
While Big Techs are all soaring through the roofs, oil bulls are struggling.
In 2022, energy prices jumped in the aftermath of the Ukraine war. But after a period of energy shortages, many countries, particularly European, have adapted. No longer are the oil and gas markets in a tight state.
Despite the repeated cuts in production by OPEC members in the last year or so, crude prices have not rallied much. WTI Crude, for instance, encountered stiff resistance at $80 and then plunged sharply this week to $74. This drop takes prices back to the 2021 levels (see below).
Based on oil’s technical pattern, does this sudden weakness present an opportunity to buy? After all, there is firm support at $70 support. Perhaps. But I will not be in a hurry to snap up oil contracts because the bears will be tempted to test that floor and see if it holds. If it doesn’t, a swift correction to $60 may occur. Wait and see is the preferred stance here.
A positive side to this oil price slide is that it will cap inflation rates for a while. This is good for the overall economy due to stronger consumer spending. Interest rates may also start falling. For example, the central bank of Canada became the first G7 monetary authority to slash interest rates this week.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored nearly 200 articles for GoodMoneyGuide.com.
