Submitted by Schwimmbo t3_zzxqzs in wallstreetbets
First off, I am aware that NVDA literally got cut in half YTD. So, on average, shorting it throughout 2022 has been a massively profitable undertaking and "the time to buy puts was exactly 1 year ago".
With those snarky comments out of the way, NVDA is still sitting on a PE of ~62 and forward PE of ~38.
That seems way too high in the current macroeconomic environment.
- Fed isn't done raising rates yet. We are yet to reach the terminal rate and they have been clear in wanting to keep it there for a while.
- Rates take some time to work through the real economy. I do think we haven't seen the pain JPOW spoke of, at least in the real economy.
- There's been real and heavy gamer backlash against the 4000 series GPUs when prices were revealed. Gamers genuinely think NVDA has lost the plot and think they can charge whichever price.
- Coupled with the end of GPU crypto mining, the market is likely flooded with cheap and still very high performance 3000 series GPUs, not generating any new revenue for NVDA.
- Their GPUs are used for state of the art AI projects in other companies. I'm far from an expert but those are expensive projects and could easily be perceived as "not essential in these trying times" making said companies pause these projects, reducing yet again demand for NVDA's GPUs.
As I said, yes the stock has lost 50% in 2022 so some of the above has definitely been priced in. What is going to drive demand for their products in such a way that they meet revenue and EPS targets? Let alone allow them to give upbeat guidance?
Positions: none so far, thinking about throwing a few grand into longer dated puts.
Calling all devil advocates to come up with a bullish reasoning to spark discussion and gauge if the ship has sailed for this dumb gamble or the bearish reasoning does hold merit and is an educated guess that should net profits.
Have a great NY and may our portfolios be green in 2023.
Edit: cleared a few typos.
Fuhnancial t1_j2eawuv wrote
The cool thing about percentages is that it can lose 50% of the 50% it already lost. Just buy the puts already