| | | | The Stock Market Is Closed… Time for a Crypto Special!
Today, we take a break from the stock market, which is closed in observance of President Jimmy Carter’s passing. Instead, we will hyper-focus on CRYPTO — the market that NEVER sleeps or takes a day off!
Come join me as we dive in and see what’s moving!
Plus, as always, we have stocks popping and dropping so come find out what is moving this morning as I look for stocks and do some live premarket analysis on SPX, SPY, NDX, QQQ, Russell, IWM and other stocks that are potential plays for the day.
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WARNING: Why Nvidia’s Overvaluation Could Lead to BIG Losses
Nvidia (NVDA) has had a phenomenal run, fueled by investor enthusiasm over AI and its applications. From powering large language models to developing self-driving car technology, the company has positioned itself as a leader in a rapidly AI growing space.
But while Nvidia is undoubtedly a technological powerhouse, its current valuation raises serious concerns about sustainability.
Let’s start with the basics — price-to-sales ratios.
Nvidia’s price-to-sales currently hovers around 31, an alarmingly high figure even for a company leading the charge in AI innovation. By comparison, Apple (AAPL) sits at eight, Microsoft (MSFT) at 12, and Alphabet (GOOGL) — Google’s parent company — is at six.
Historically, price-to-sales ratios above 20 are reserved for rapid-growth companies, and it’s hard to argue Nvidia still fits that mold. The sheer scale of its market cap makes rapid growth mathematically difficult.
To double Nvidia’s current valuation, we’d need trillions of dollars to flow into the stock. Where does that money come from? Printing it creates inflation, and siphoning it from other tech giants like Apple or Alphabet isn’t realistic.
These big players already dominate the Technology sector (XLK), and their valuations are grounded in far broader market fundamentals.
Another red flag is Nvidia’s reliance on maintaining outsized growth. Companies at its scale need to sell increasing volumes of products or services to justify lofty valuations.
The problem?
The AI hardware market may not grow fast enough to sustain this momentum. While Nvidia recently unveiled a new chipset at CES 2025 capable of running 200 billion parameter AI models efficiently, competitors like AMD (AMD) are hot on its heels with their own advancements.
Even Nvidia’s roadmap, which outlines transitions from large language models to AI agents and self-driving cars, highlights the long-term nature of these opportunities.
AI-driven/self-driving cars could be a game-changer, but they’re not an overnight phenomenon. Meanwhile, the demand for Nvidia’s high-margin AI chips may face headwinds as growth slows and competitors ramp up production.
Investors should also consider Nvidia’s historical patterns.
The stock has experienced 70–80% drawdowns multiple times in its history. While past performance is no guarantee of future results, it’s a stark reminder of how volatile even leading stocks can be.
Nvidia is undeniably a leader in AI innovation, but the market appears to have priced in perfection — and then some. A price-to-sales ratio above 30 leaves little room for error. For those who see Nvidia as a long-term play, a pullback to more reasonable valuations could offer a better entry point.
Until then, the company faces the monumental task of growing into its valuation in a market that might not have enough fuel to push it further. In the world of investing, the bigger the valuation, the harder it falls when expectations aren’t met.
Be careful.
Nvidia may have the technology to power the future, but its stock price suggests it’s already there. Reality might have a different story to tell.
Today’s Daily Chart Setup: Catalyst Pharmaceuticals (CPRX)
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