Hey Traders,

The banking crisis caused a risk on/risk off trade flip.

Teach used to be risk on – now it’s risk off.

Risk off was banking, energy, and consumer staples – they are now risk on.

Since it appears we are in a risk on environment for the time being … what does that mean for Big Tech?

More importantly what does it mean for one of the best performing names out of any company in any sector …

NVIDIA Corp (Ticker: NVDA) .

Let’s break it down, starting with:

The Good

The company makes the chips people want..

Are you a gamer? NVDA. Bitcoin? NVDA.

The company cleared 4.4 billion dollars in the last year and has revenues of almost 27 billion dollars…

And (according to them at least) it is at the forefront of AI.

The margins are high, and the company is seeing growth in earnings this year after a big fall off in May of 2022.

It crushed earnings last quarter beating by .40 a share.

It’s been one of the best performing stocks all year.

The Bad

The stock has already priced in a ton of growth. Its PE is 152, its Price to REVENUE is 10 to 1.

That is really really high …

The recent uptick has been on the back of what might be a bit of a fad.

It’s now the 5th largest stock in the NDX (when you combine GOOGL and GOOG into one value).

But think about that PE and RE. Amazon (Ticker: AMZN) is about 2 to 1 (although AMZN manages to find ways to lose money.)

Tesla (Ticker: TSLA) has a PE of 52, and its revenue per share is about 8 to 1.

Remember when TSLA only went up?

How’s that been going?

NVDA has had a huge run and some pretty big dips:

The last time PE and RE got stretched this high, NVDA took a dive.

If you want lofty PE’s in Chips, there might be more upside in Advanced Micro Devices, Inc. (Ticker: AMD).

I think the easy money has been made. Unless you are a true believer, I don’t see a lot more here.

Your Only Option,

Mark Sebastian