Back in August, we wrote this post wondering if Nvidia is the new Cisco stock of the 21st century given it’s stratospheric rise so let’s take a look at a current chart of Nvidia vs Cisco.
In the post we were tempted to buy puts on Nvidia but we didn’t and we are glad we did not because markets can remain irrational longer than you or I can remain solvent.
Of course, the reason Nvidia can’t keep going up forever is because competitors, seeing how much money Nvidia is making, will jump into the market and attempt to replicate the success and bifurcate chip markets so that profitability drops and only economies of scale save the best firms.
ARM has jumped 50% recently and it’s no surprise that the feeding frenzy has begun and will continue to become more hectic but with the Fed not interested in cutting rates any time soon, it will be an expensive borrowing proposition for any current and future chip players in this market.
We’ll keep an eye on this phenomenon but Nvidia, based on Cisco’s history, may stay at nose bleed levels for two more years but we’ll need to wait and see what happens so stay tuned, stay profitable and stay solvent…