If it is higher, I would take profits as the good news is mostly priced in. We will likely see a sharp price movement in NVDA in one direction or the other. Secondly, even if Nvidia can maintain that pace of uninterrupted growth, which means Nvidia will own 100% of the GPU market, it would only reduce its valuation to a still expensive 9x sales.”Īll eyes will be focused on today’s earnings report and, most importantly, the guidance they provide about the recovery of the semiconductor space and its footprint in the “Generative A.I.” space. It is far different to grow sales at that pace when sales are $2 billion versus $33 billion today. First, since 2002, Nivida has had a monthly sales growth of just 1.26%. “The problem with 29x price to sales is that between now and the end of 2033, Nvidia will need to grow sales by 1% every month for the next ten years, and the stock price can not change during that period. There are two problems with this. Nvidia has a long history of trading above and below high valuations, with its long-term average running at roughly 9x sales. The question is whether or not their earnings report today will be enough to justify a 29x price-to-sales ratio. movement is Nvidia (NVDA) which has been on a stellar run this year. Gold is currently untethered and may continue to be volatile as debt cap negotiations and fear-mongering continue.Īs I discussed in Tuesday’s blog, “A.I., Narrow Markets, And The New TINA,” the darling stock of the A.I. Conversely, there is no relationship between prices and real yields when their policy is hawkish. The graph below shows the strong correlation (r2 =.64) between gold prices and real yields when Fed administered an easy policy. However, when the Fed is hawkish, gold prices are much more unpredictable. In such an environment, gold traders and investors can predominately take their cue from the Fed and inflation expectations. The correlation between gold and real yields is robust when the Fed pushes interest rates below their natural rate (below expected inflation), as they did through much of the post-Financial Crisis era. The correlation is negative, meaning that as real yields fall, gold prices rise.” “ gold prices are highly correlated with real yields when real yields are near or below zero. In Gold Investors are Betting on the Fed, we quantify how monetary policy greatly affects gold prices. Understanding what is and isn’t driving gold prices is crucial for those trading or investing in gold. However, looking back over time, the price of gold is highly correlated to the level of real yields, and at other times, like today, it gyrates with markets, economic data, and political events. At first glance, such price behavior sounds perfectly normal. Recent volatility in gold prices corresponds inversely with the dollar and with the news surrounding debt cap negotiations. Since early May, gold has given up a third of those gains. In March and April, the price of gold rose by 15% as the debt cap was hit, and the banking crisis accelerated.
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