The first rule of any type of investing or trading is to set boundaries and rules. Ask any (successful) day trader and they will tell you that one of the most important rules to follow is to set your strategy and stick to it regardless of your emotions.
And that´s exactly what I did with Nvidia recently. When things were a bit rocky and after their earnings report I predicted a dip and I predicted that it would rise to settle around the 135$ level. I also have been quoted as saying (which is true) that if it drops to 115$ I will buy more short term to ride the wave up to the 135$ mark but then the messy stuff kind of hit the fan.
The little so and so´s kept selling!
I didn´t expect the stock to fall so much to be honest, which just goes to show that even when you have a pretty good understanding of a business, you can never predict with certainly where it will go.
In the last month, Nvidia’s stock has experienced significant volatility, with shares gaining and sliding based on various events and market conditions. The company reported strong Q2 2024 earnings, exceeding expectations with an EPS of 68¢ (vs. 65¢ expected) and revenue of $30.04 billion (vs. $28.74 billion expected).
However, concerns arose regarding a potential slowdown in growth, particularly concerning Nvidia’s upcoming AI chips, known as Blackwell, which faced production delays. Despite the company’s dominance in the AI chip market and optimistic forecasts from some analysts, Nvidia’s guidance for the current quarter fell short of high-end estimates, suggesting a slowdown in the explosive growth seen in previous quarters. This, combined with the stock’s high valuation metrics, led to a decline in Nvidia’s share price, as some of the speculative value was lost. Nonetheless, the stock began to recover in mid-September, driven by strong demand for its new GPUs, increased spending on AI infrastructure by major customers, and positive news such as the completion of CEO Jensen Huang’s stock sales.
So, what did little old me do? I followed my rules. I lost some money. But I slept better for it. And now I have jumped back on the bandwagon that is the rollercoaster of of Nvidia.
There has never really been any doubt in my mind over the long term potential for this stock and my “long term” element remains untouched but the “trading” element didn´t go as I thought so it was wise to jump ship because it was impossible to say what was going to happen. My losses were not huge and the peace of mind was well worth it. But now, I see that there are gains being made and the upward trend has continued.
What do I think will happen? I maintain that it´s going to be volatile but they are addressing many potential future issues such as their Taiwan supply chain (which is a curious thing since TSM have announced their plans to open a massive plant in Germany!) so they are trying to plan to mitigate potential political tensions and let´s face it, when it comes to AI, they are light years ahead (for now at least).
So I am back on the ride for now, we will see if my prediction of 135$ as a baseline is reached. It certainly will be slower than I thought to get there but the next earnings and guidance will be a big teller when it comes to what investors decide to do.
The main thing here that I want everyone to keep in mine (and this is not advice) but always set a plan and follow it. Don´t listen to rumours, tittle tattle in the press. Read as much as you can, understand the stock and make a plan and if your plan goes off track then follow the “what to do when it goes off track” part of the plan.
And yes, there will be people saying “what on earth did you do selling that stock?” but the truth is that I don´t care. I play my game by my rules!
Here´s a review of the financials of NVIDIA thanks to our friends at Trading View:
Happy investing!
