One of the oldest adages on Wall Street is “buy low, sell high.” It’s also a contradictory statement. After all, making money is the whole point of investing, is it not? But if it were really that simple, everybody would be rich. Typically, speculative stocks are priced low and fundamentally great stocks are priced high. Nvidia Corporation (NASDAQ:NVDA) fits the latter descriptor perfectly.
Nvidia is commonly known as a semiconductor powerhouse, but it’s so much more than that. As the generally declining markets in PCs and hardware demonstrate, you can’t survive on chip-making alone.
NVDA management got the message loud and clear, and has stepped into other innovations, primarily artificial intelligence. Noted by InvestorPlace contributor Will Ashworth, SoftBank Group Corp (OTCMKTS:SFTBF), has invested billions into NVDA stock. CEO Masayoshi Son received widespread recognition for supporting advanced technologies.
Still, greatness has a cost, and that means an elevated price point for Nvidia shares. And let’s be real — few newcomers are going to be excited about buying NVDA stock near all-time highs. We can talk all we want about Wall Street’s latest adage, “buy high, sell higher.” When the markets amp up demand, “bag-holding” fears tend to cause a loss of interest.
I understand the feeling well. The bulls likely thought I was nuts when I went bearish on Advanced Micro Devices, Inc. (NASDAQ:AMD). AMD stock then went on to lose 23% in the markets. I’m sure that investors don’t want to repeat that experience. Fortunately, I don’t think Nvidia and AMD occupy the same category.
Nvidia Stock: Trading for Tomorrow
The basic argument favoring NVDA stock is that not all investments that do well do so because of mass stupidity. A great example of this is bitcoin. The cryptocurrency has soared above everyone’s expectations. In response, the mainstream media offered plenty of cautionary tales. Yet the enthusiasm for bitcoin is so strong that it will almost surely hit $3,000 within a year from now.
I say that with confidence because bitcoin isn’t merely a digitized commodity. The blockchain technology that empowers the cryptocurrency offers a safe, transparent platform for global commerce. Sometime in the future, international transactions will no longer have to consider exchange rates or economic stability. People will trust the system, not a human operator. That’s why bitcoin will eventually rule the world, whether we like it or not.
Nvidia benefits from the same line of reasoning. I would worry if the company was just relying on a super-quick graphics processor at a reasonable price. Such strategies are not unique. Although they can be effective when executed properly, the competition can duplicate the process. If all else fails, rival firms can always drop the price on their produce lines.
But to compete on innovation is an entirely different matter.
One of the more exciting developments is the partnership between Nvidia and SAP SE (ADR) (NYSE:SAP). Together, these two companies are creating a program that provides near-real time feedback on the impact of televised advertisements. Traditionally, such metrics could take a month-and-a-half to obtain.
Just as importantly, Nvidia’s foray into “smart cars” is a huge success, and will continue to offer potential. Similar to consumer conveniences we now take for granted, automated driving is our destiny. Thus, the rise of NVDA stock is almost an inevitability.
NVDA Stock Is Rock Solid
If you’re still not convinced, do yourself a big favor: read Mr. Ashworth’s entertaining take on Nvidia. For those that don’t have the time, I’ll break it down for you. He’s essentially urging folks to not get cute with their portfolio. Not only does NVDA have excellent products, it’s backing up the product line with hard numbers on the financials. AMD absolutely cannot say the same thing.
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But whether you want to look at Nvidia from its future potential, its consistently strong financial performance, or its technical momentum, NVDA stock is a buy.
I wouldn’t make the argument that it’s undervalued, so the “buy low, sell high” crowd may be disappointed. At the same time, I don’t think it’s wise to punish Nvidia simply because the company is successful.
As of this writing, Josh Enomoto is long bitcoin.
