Why do I endlessly post pictures of my dog Everest and insist on calling him Mr. Nvidia? Is it all a big joke?
Not at all. It's a sub-rosa way to be skeptical of your fellow buyers because they may not know what they own.
We have all seen rocket-ship stocks before. When I got in the business, Dome Petroleum was the flavor of the day. Uninformed speculators piled into this Canadian wildcatter and it used to do nothing but go higher until it crashed to earth because it didn't have nearly the amount of oil the speculators thought it did.
Then we had a remarkable run in Digital Equipment and DSC Communications. The former represented a kind of mini-computer that was meant to supplant IBM (IBM) . The latter had a switch that was crucial to the internet. We used to chant "Digi, Digi, Digi" on the trading desk when the latter would levitate. Both crashed ignominiously as it turned out that others leapfrogged the technology.
Needless to say, during the dot-com era there were dozens of Nvidia-like stocks including Infospace, where its CEO at the time, Naveen Jain, said the internet messaging and email company would have a trillion-dollar market cap. Like the others, it was pulverized and lost people fortunes and, I swear, most people who owned it had no idea what it did other than go up.
Iomega, the zip-drive company, had its day in the sun once, too, and that stock couldn't be contained until it got to be so overvalued that it fell under its own weight.
We had a real respite from this kind of action after the great crash of 2007-09, where it was very rare to see a stock power higher when most didn't know what it did.
Nvidia's (NVDA) not like Intel (INTC) , where you would recognize that it's the brains behind PCs. It obviously isn't Apple (AAPL) , where there was always a consumer element. (Nvidia and Apple are part of TheStreet's Action Alerts PLUS portfolio.)
This is a company with chips that power everything from gaming to autonomous driving to robots to data center and to crypto-currency mining.
It's the latter that has captured the fantasy of many investors as Nvidia has about $150 million in benefits from crypto-mining, according to RBC Capital in this morning's positive piece about the stock. When China banned straight purchase of bitcoin, it didn't ban the mining of the coins, which require Nvidia or Advanced Micro (AMD) chips.
But I think those are really the tail that wags the dog of Nvidia, so to speak, and if you notice closely, we had to chop off the tail of our rescue dog, making the analogy even more cogent.
Why do you want to own the stock? Because it has better, relatively cheaper chips for these cloud data centers. Because it has the best chips for voice. Because its chips are used in the best video game systems, like Switch. Because it has the best chips for autonomous cars. Go ask Tesla (TSLA) . Because it has chips that help artificial intelligence in healthcare for predictive analysis. Because it can make Adobe-like images of you with your voice in real time.
In short, this is the chip that can power more applications than anything Intel did in the 1990s when the stock kept doubling and doubling and doubling again off the 286, 386, 486 and Pentium chips.
The stock got hammered after its last conference call when it indicated that it was having a difficult transition into new data-center chips. We are learning that the change has been made and this quarter will reflect it.
I don't think this stock will crash and burn like some of those ne'er-do-wells. I do think it can have a run like Cisco (CSCO) or Microsoft (MSFT) or Intel in the 1990s. But it will have periodic swoons where it will be a dog. Ask yourself, if you own it, do you know more about my dog because of my Twitter posts than you know of the actual Nvidia? If you do, then sell it now. You've got a great gain and just move on.