NVIDIA predicted to come down eventually as stock overtakes Alphabet

Nvidia Corp. (NASDAQ:NVDA) is trading in unchartered territories and has become “frothy.” These are the comments of Cleo Capital’s Sarah Kunst, in an interview with CNBC.

I think the price that it’s at right now is very, very, very hard to maintain.

The view comes as Nvidia continues its upward trajectory. Nvidia stock has returned over 230% in the last one year, with 52% of the gains made year to date. According to Kunst, Nvidia’s unstoppable rally will end, and the stock price will eventually come down.

The analyst’s comments depict a clear picture of one of the best AI stocks that shows no signs of stopping. While gains are widespread for other AI stocks, Kunst references Nvidia’s price-to-earnings ratio of 97. The PE means investors are willing to pay 97 times the stock’s price, which is extremely higher than peers.

Meanwhile, the gains means that Nvidia has overtaken Alphabet to become the third largest US company. With a market cap of $1.803(£1.44) trillion, the chipmaker only trails Microsoft and Apple by market size.

Nvidia cannot maintain its upward trajectory forever. Attention now turns to its Q4 2024 results on February 21. Analysts project a EPS of $4.18, higher than $0.65 in the same quarter of last year. This is higher than a reported EPS of $4.02 in Q3.

However, it is likely that the Q4 earnings expectations are already factored in the current price trends. So attention may shift to guidance and notes accompanying the financial statement release. 

NVIDIA’S meteoric rise takes price to record levels

From the stock chart, NVIDIA trades at a record level. There are clear overbought conditions on the stock from the RSI reading. The stock has remained in the overbought zone for a month, meaning that buying interest remains strong.

Is it recommended to buy NVIDIA now?

NVIDIA is a robust stock, boosted by trends in AI and the company’s own fundamentals. The company has been increasing earnings, boasting stock. 

However, the high valuation is a deterrent to investing in the stock now. The quarter results may give a glimpse of the future, offering a chance to evaluate the stock further. However, NVIDIA is only attractive on a correction. The high price may force a stock price correction and NVIDIA is not recommended to buy right now.

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