The soaring price action in NVIDIA
DIA
last week, based a good earnings report and on projections for the impact of artificial intelligence, is extraordinary. The stock climbed to a new all-time high as those money managers and retail investors who didn’t want to be left behind climbed on board.
Is it now overvalued? NVIDIA is trading at a price-earnings ratio of 202 and at 43 times its book value. The price to sales ratio is 36 and price to free cash flow sits at 212. Those are not the type of metrics that Benjamin Graham would approve of but growth stock proponents who are piling in would disagree.
The leading components of the NASDAQ
NDAQ
-100 participated in what seemed to amount to a buying panic for the closely followed tech and social media-heavy index. Amazon
AMZN
, Apple
AAPL
, Google
GOOG
, Meta, Microsoft
MSFT
and Tesla
TSLA
joined in the bullish fun but without making it all the way up or past their all-time highs.
The 7 stocks mentioned have gained by 44% since the beginning of the year while the other 493 stocks in the Standard & Poor’s 500 are up by just 1%. Things have become a bit lopsided thanks to AI-crazed investors unable to refrain from pressing the buy button over and over in that small, select group said to benefit.
Here’s the monthly chart for NVIDIA:
It’s uncommon to see bullish price candlesticks as big as the one for the month of May. The stock has clearly broken above the previous high of just above $340 during 2021. Another uncommon characteristic is how far it is now above the 50-month moving average (the blue line) and the 200-month moving average (the red line).
Here’s the monthly chart for Amazon:
It’s a nice rally in May but this stock is far below its all-time high up near $190 in 2021. To be precise, it’s off that previous peak by 36%. Note that Amazon remains below its 50-month moving average, the ascent of which seems to be diminishing.
The monthly chart for Alphabet looks like this:
It’s another tech stock participating in the AI-driven upward blast for May, but unlike NVIDIA, the price remains well below that early 2022 all time high up there just above $150. Alphabet needs to rally by another 17% before reaching that old peak level.
The monthly chart for Meta is here:
The May climb upward continues the solid gains coming off of the October, 2022 low below $100. The stock is back above the 50-month moving average. Note how much further it must go to break above the all-time high of just above $380 in 2021.
One more thing: according to BespokePremium.com, the tech sector is now more than 3 standard deviations above its 50-day moving average. The analytics firm says it hasn’t traded this far above it since 2004. It’s these types of metrics that make you wonder how much further this rally can run.
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