High stock valuations can be justified by strong current growth metrics, but investors should recognize that such growth rates are rarely sustainable indefinitely; therefore, while a company may be overvalued relative to its long-term potential, it may still be worth holding until growth slows.
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Is Nvidia a Bubble?Added:
Nvidia stock is up over 10% this week and is now worth $5.7 trillion.
That would make it the third largest company by GDP, only behind the US and China. The company is currently trading at 20 times sales, which is very high.
But take a look at this chart. This is not revenue because who cares about revenue? This is profit quarter over-arter. And if you take a look at the same report from this time last year, the company is up over 50% in profits year-over-year. SO, I WOULD SAY THAT TWO THINGS can be true. One, Nvidia is ridiculously overvalued. It's not going to continue growing at 50% profit year-over-year forever. But two, it currently has the numbers to support its valuation. So, I wouldn't be trying to short it until that growth slows.
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