It’s Nvidia’s moment of truth.
The semiconductor company is set to report earnings Wednesday afternoon. This comes after the stock has rallied more than 100% this year and, as the third-largest weighting in the SMH semiconductor ETF, its next move could impact the entire chipmaker space.
Wannabe Nvidia investors should watch out after its massive run, warns Joule Financial President Quint Tatro.
“Nvidia is the definition of when ‘momo’ meets FOMO,” Tatro told CNBC’s “Trading Nation” on Tuesday, referring to its high-momentum rally and the traders piling into the stock to chase the gains.
Tatro says its fundamentals have become overextended — for example, the stock is trading at 54 times forward earnings and 19 times forward sales. The SMH ETF trades at 22 times forward earnings and six times forward sales.
“Now you don’t try to get cute and short this stock, you’ll get run over, but the reality is if you’re buying this stock up here, I mean it’s very, very dangerous. It’s a great company, unbelievable balance sheet. You put it on your list and when the market eventually corrects as it will at some point, then you step in and buy some shares. But I do not think you chase this name, especially into earnings here,” said Tatro.
In the same “Trading Nation” interview, Ascent Wealth Partners managing director Todd Gordon said Nvidia still has room to run over the long term.
“It’s a huge momentum stock. They are a leader in AI, data centers, machine learning, self-driving cars, cloud, gaming,” Gordon said. “You’re right, 50 times forward earnings, but they’re positioned well in two high-growth segments — gaming and data center cloud.”
Gordon says gaming should get a boost from an upgrade cycle tied to upcoming console launches from Sony and Microsoft. Data center and cloud revenue should also continue to benefit from the work-from-home trend.
Disclosure: Gordon holds Nvidia.