Today I asked David Faber and Carl Quintanilla on Squawk on the Street to stop calling me Jim. From now on I want to be known as Nvidia.
I said it not to say "go buy Nvidia," the hottest semiconductor stock in this market, but in recognition that this stock has become so favored, so anointed that it's become almost cartoonish in its race to wherever the heck it is going.
You see, the stock of Nvidia (NVDA) , by its sheer momentum, has become a self-fulfilling prophecy. Analysts have price targets for stocks, and with each giant step this stock takes, it outruns the levels that analysts were expecting, so they have to go on the horn -- meaning speak to the salesforce -- and raise the price target, usually giving a whole new reason for the comments so as not to just be playing the momentum game, which, after all, is exactly what they are playing.
It goes without saying that I like Nvidia, the company. It has all the things you want from a semiconductor company specifically, and a technology company in general.
Its chips are the best in class for artificial intelligence. They are among the best for autonomous cars, and many of the world's auto manufacturers are embedding their chips in autonomous driving features.
It is the king of the data center. A new box with an Nvidia chip that comes out this fall will have the power of 400 servers. That could radically change the entire landscape if that power can be used in data centers to replace hot-burning machines. You can only imagine what that would do to the data center farming industry.
Its chips are used in the most explosive part of gaming. They are the fastest, so they are used by the 200 million people who participate in e-sports. And we know from our work with Take-Two Interactive (TTWO) these Nvidia chips allow lifelike representations on your screen. You need the Nvidia chips for the Twitch, which allows you to watch others play video games. Poetically, you need their chips for the Switch, the Nintendo game that is the best seller in the gaming world. In fact, you can't even get one, and analysts expect 15 million to 16 million to be sold this year alone. That might be low-ball.
Their chips are the most important for artificial intelligence. They power voice-interactive machines like the Echo. They are being tried throughout the cloud, and when you hear about machine learning, you are most likely hearing about the harnessing of Nvidia chips.
In other words, you have the possibility of some sort of real blast-off here. Some are comparing it to what happened to Intel INTC where the stock went from $1 in 1987 to $66 at the top in March 2000, a 6,500% move. If Nvidia were to emulate that course, it could go to $10,500.
I know that seems ridiculous, but it's what the bulls are secretly dreaming about.
Here's the problem, though. As you can see from today's brutal reversal, even stocks that grow to the sky can get waylaid.
The idea of paying up every day for the same story is one that I find antithetical. I am preparing for an important call to subscribers of Action Alerts PLUS, my club newsletter, and I am feeling a little defensive that we haven't bought enough tech. But the charitable trust is way overweighted in it and I am wary of being caught up in a frenzy that's been occurring of late in some companies' stocks.
Remember my view: I have said on pullbacks brought on by extraneous circumstances that institutions will look to buy certain names, including Nvidia. But that doesn't mean you just go in and buy them.
Be prudent. It's not prudent to charge in every day and chase. Chasers get hurt and that's exactly what's happening today.
