A weird thing happened to Nvidia (NASDAQ: NVDA) stock on Wednesday (28 August). The artificial intelligence (AI) giant posted its latest earnings. And, once again, they beat expectations.
But the stock price fell on the day. And it dipped a bit further the next day.
Nvidia failed to do one key thing. It didn’t blow expectations out of the park. It didn’t rip the forecasts out of analysts’ hands, chew them up and spit them back in their faces.
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Merely doing better than people had hoped just isn’t good enough these days. Not for the latest stock market darling valued at more than three trillion dollars, at least.
And just think, what if one quarter the company simply manages to equal what’s expected of it? That would presumably be a disaster.
And if it should actually fall a bit short? My knees are already trembling at the prospect.
What do they do?
Here’s a question I’ve wondered. What do analysts do when a company beats their forecasts? Don’t they bear that in mind and revise their next set of predictions upwards, and try to be more accurate?
That surely means it’s inevitable that some day they’ll nail it. And the company won’t beat expectations, never mind shatter them. And it won’t have done anything wrong.
Let’s get back down to earth a bit. Is this AI thing turning into madness? I think it might be. And that’s why I wouldn’t put a penny into Nvidia stock right now.
That’s even with some pundits claiming that not buying Nvidia right this minute’s the dumbest mistake I could possibly make.
I don’t want to play AI short. I think it’s going to be exciting, profitable, scary… in fact, it’s all those things already.
But at times like these, I’m reminded of the last next big thing. I remember Tesla which, for a while, everyone seemed to think was the only stock to buy. I recall someone on a YouTube channel dedicated to blowing things up saying “I have much Tesla stock“.
Another great stock
I’m not knocking Tesla, just as I’m not knocking Nvidia. I think Tesla could be a great long-term investment. It’s just that, today, the price is only about half what it was when YouTube explosives geeks were raving about it.
I’m not old enough to remember the beginnings of the aviation industry. Even billionaire investor Warren Buffett (whose Berkshire Hathaway just topped a trillion dollar valuation, incidentally) isn’t. But he has pointed out that the pioneers didn’t make the big money.
Now, I don’t think that about Nvidia. In fact, I’d say it’s not really a first mover at all. Nvidia and the others are building on technological development that’s been going on for decades.
And I do reckon Nvidia could go on to make huge profits for its shareholders. I just won’t buy into any mania when I think the mania’s too hot, even if it’s a good mania.
I might buy Nvidia some time when heads are cooler though. When it might be cheaper.
