Are You Selling Nvidia for the Wrong Reasons?

The market has hit a few bumps in the road. The tech darlings, while still loved by many, aren’t loved by all as of late. Mainstream media has shifted from buying the Magnificent Seven with complete disregard to debating the merits of buying Nvidia NVDA here or looking for opportunity elsewhere.

I spent much of Wednesday running different valuation scanners, comparing revenue growth, EPS growth, gross margins, operating margins, profit margins, etc. Ironically, Nvidia often turned up at or near the top of every large-cap search. Is it cheap? No, but if it continues on the current torrid pace, it isn’t exactly expensive.

I understand the profit-taking in Nvidia as well as the other semiconductor and AI names. Heck, I espouse the concept of trailing stops and taking profits at least once, if not two or three times, every month. Just understand why you are selling the same way you should understand why you are buying.

If you are selling because Nvidia is “expensive” because someone on TV said it had gotten too expensive, I would encourage you to examine the metrics closely. There are plenty of reasons to sell the name, but I don’t relate to it being expensive.

'Cutting' to the Chase

With the recent weaker economic data and taming inflation numbers, a September rate cut is in the books even before it is officially in the books. The fact the market appears to be considering a real potential for a 100 basis point cut before the end of the year has me a bit concerned that we’ve set expectations too high.

We will see 50 basis points, but even 75 feels stretching it. One hundred points, or 1 full percent, feels like a want, a yearning for cheap money again, rather than an economic need at present. 

Let’s get through the September meeting and one more round of economic data before we start calling for a full point cut in 2024, shall we?

At the time of publication, Byrne had no positions in any securities mentioned.