Nvidia (NVDA) is leading the rally in Artificial Intelligence (AI). However, NVDA is one of the most expensive stocks on Earth. It is currently trading at a P/E ratio of 200 and a Forward P/E ratio of 50. It is extremely expensive. We generally like stocks with a P/E ratio of less than 18. Thus, we are not buyers of this stock.
Nvidia makes computer chips that are used in gaming, artificial intelligence, and other applications. The company has been growing very quickly in recent years, and its stock price has gone up a lot. However, the stock is now trading at a very high price-to-earnings (P/E) ratio, which means that it is too expensive.
A P/E ratio is a measure of how much investors are willing to pay for a company's stock relative to its earnings. A high price-to-earnings ratio means that investors are expecting the company to grow very quickly in the future. However, if the company does not grow as quickly as expected, the stock price could fall.
In the case of Nvidia, the company is expected to continue growing quickly in the future. However, the stock is already trading at a very high price-to-earnings ratio. This means that there is a lot of risk involved in buying the stock. If the company does not grow as quickly as expected, the stock price could fall a lot.
Therefore, it is too expensive to buy Nvidia stock right now. As Intelligent Investors, we would wait for the stock price to come down before buying it, even if we have to wait years or decades. We wait until it goes on sale.
In addition, insiders are also selling their stock in the company. This is a really big red flag for us. We will never buy stock in a company while insiders are selling their shares.
Disclaimer: We currently do not own shares in Nvidia (NVDA).