Why Nvidia's boom isn't a bubble
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Why Nvidia's boom isn't a bubble: Morning Brief
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Did you think Yahoo Finance was done covering Nvidia's eye-popping week of stock price gains on the back of a mind-bending earnings call and longer-term outlook?
Well, boy did you think wrong!
The question on my mind today is whether we are witnessing a good ole' fashioned stock price bubble in Nvidia.
I am inclined to say no.
But I am tossing onto the field a ton of caveats for investors who should be careful getting into a stock (or even considering getting into it) that just gained $200 billion plus in market cap in a single trading session.
For perspective, McDonald's ENTIRE market cap is $209 billion!
A stock price bubble could be loosely defined as a situation when the price of a stock completely detaches from reality to the upside. This is often when a sexy investment thesis captivates Wall Street trading desks, sending the stock higher. Then retail investors get excited and buy without doing their fundamental homework.
The bullishness feeds on itself. Until it doesn't.
We've seen countless stock price bubbles over the past 20 plus years.
There was the dot.com bubble when money-losing tech stocks such as Pets.com were artificially propped up on pure hype.
We've had the cannabis stock price bubble of 2020 and early 2021 on hopes of federal legalization bringing big profits to money-losing pot upstarts like Tilray and Canopy Growth.
There was the famous meme stock bubble at height of the pandemic that saw astronomic gains in GameStop, AMC, Bed Bath & Beyond and other fundamentally weak stocks, seemingly overnight.
Artificial intelligence (AI) stocks this year have felt bubblicious many times, especially when you pick apart the fundamentals of the companies being hyped on trading desks, Twitter, and in chat rooms.
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