After hours the price of Nvidia stock is $502 per share after earnings and it reminded us of another tech stock from the dot com era called Cisco. Back then the premise of Cisco valuation was that the company made infrastructure that was at the core of the internet, networking gear and there would be a never ending expansion of the networking business. Let’s take a look at a chart comparing Cisco with Nvidia.
If the post COVID era has taught us anything it is that the valuation now are on steroids. Cisco stock chugged along with stead growth but in September of 1999 the stock price began going up aggressively until it’s peak in March 2000 then held there somewhat volatile until the descent started about a year later in October of 2001 until it bottomed on October 2002.
The premise of NVIDIA’s valuation now is that everyone wants AI chips and NVIDIA is the primary game in town and some say the only game in town so the valuations are totally correct. Is it Déjà vu all over again.
We are tempted to buy puts on NVIDIA but with the crazy volatility and price swings it’s too risky for us right now but we’ll keep an eye on it so stay tuned, stay profitable and stay solvent…