The 'Very Bearish' Side of This AI Chipmaker

What a day for one of the world's biggest companies... Chipmaker Nvidia (NVDA) reported its first-quarter numbers after the market closed last Wednesday. Its earnings handily beat Wall Street's consensus estimates. [Chaikin PowerFeed]( The 'Very Bearish' Side of This AI Chipmaker By Marc Gerstein, director of research, Chaikin Analytics What a day for one of the world's biggest companies... Chipmaker Nvidia (NVDA) reported its first-quarter numbers after the market closed last Wednesday. Its earnings handily beat Wall Street's consensus estimates. And the stock surged 24% the next day. Now, a 24% gain in a single day is incredible for any company. But it's even more impressive when you consider Nvidia's massive size... You see, Nvidia was already among the top 10 largest companies in the world. Then, its market cap jumped $184 billion in one day. In other words... Nvidia gained the equivalent of 18 stocks on the edge of large-cap status. It's now approaching a $1 trillion market cap. The only other companies to hit that level are Apple (AAPL), Microsoft (MSFT), Saudi Aramco, Alphabet (GOOGL), and Amazon (AMZN). Nvidia is on an incredible run higher. And that leaves us with a simple question... How do you engage with this type of stock? We'll turn to the Power Gauge to help us figure out the answer... Recommended Links: [Why The "Perfect Storm" In Gold Today Could Make You 10X Your Money]( Gold has been surging in recent weeks amid growing recession concerns and the fast-approaching deadline before the U.S. defaults on its debt. But according to 50-year gold expert John Doody, whose work is read by gold mining executives and over 40 professional money managers all around the world, most folks are completely missing how to play this situation for maximum wealth protection... and profit potential. [Click here to watch now](. [Big 2023 Bankruptcy Warning]( U.S. corporate bankruptcies are now at a 12-year high... but according to the world-renowned forensic accountant who called the 2008 and 2020 crashes months in advance, this surge of bankruptcies is just getting started. In fact, he says there's one popular stock that could go bankrupt in a matter of WEEKS. It's one of his top SELL recommendations today. [Click here for full story](. Regular readers know the Power Gauge is our system for finding the best opportunities in the market. It's built on Chaikin Analytics founder Marc Chaikin's five-plus decades of experience. The Power Gauge looks at 20 different factors in four categories – Financials, Earnings, Technicals, and Experts. And using all that data, it produces an overall rating for more than 5,000 stocks. Our system turned "bullish" on Nvidia in late February. And it still holds that ranking today. Better still, the Power Gauge boasts "very bullish" grades for the stock's relative strength and our Chaikin Money Flow indicator. We put a lot of weight into those two factors... If a stock is outperforming the market (relative strength), there's a good chance the momentum will continue. And the Chaikin Money Flow indicator gives us a glimpse into what the "smart money" is doing. It's a great sign when these powerful investors are buying. Over the years, Nvidia became known for its terrific graphics cards. And it's getting a bit of a resurgence with so much hype about and focus on artificial intelligence ("AI") these days. For AI to achieve its full potential, [we'll need newer, more powerful chips](. That's what Nvidia hopes to deliver. And unlike many growth-minded companies riding disruptive trends, Nvidia is solidly profitable. The Power Gauge is "very bullish" on its return on equity. But it's not all sunshine and butterflies... The Power Gauge also includes four valuation-related factors (price to book value, price to sales, free cash flow, and projected price to earnings). And today, the system ranks Nvidia as "very bearish" in all four factors. Put simply, Nvidia's stock is far too expensive right now. Its price-to-earnings ratio is roughly 49 (based on next year's estimated results). And its price-to-sales ratio is about 36. For perspective, the chipmaking industry's median price-to-earnings ratio is 16.5. And the industry's median price-to-sales ratio is 4.2. In the end, the takeaway is clear... Nvidia is flying magnificently right now. It's up roughly 240% since last October. And with the AI hype in full force, we can't deny the stock's current momentum. But some of our cockpit gauges are already flashing red. The valuation-related factors are all "very bearish" right now. Thankfully, the Power Gauge gives us the nuance we need. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +0.94% 6 21 3 S&P 500 +1.30% 127 267 105 Nasdaq +2.56% 49 38 13 Small Caps +1.10% 459 910 511 Bonds +0.81% Information Technology +2.84% 44 20 0 — According to the Chaikin Power Bar, Small Cap stocks remain somewhat more Bearish than Large Cap stocks. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Information Technology +4.64% Communication +1.22% Discretionary +0.28% Energy -1.09% Real Estate -1.41% Industrials -1.44% Financial -1.56% Utilities -2.30% Health Care -2.88% Materials -3.04% Staples -3.28% * * * * Industry Focus Homebuilders Services 21 13 0 Over the past 6 months, the Homebuilders subsector (XHB) has outperformed the S&P 500 by +9.47%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #2 of 21 subsectors and has moved down 1 slot over the past week. Top Stocks [rating] MHO M/I Homes, Inc. [rating] TMHC Taylor Morrison Home [rating] BLDR Builders FirstSource * * * * Top Movers Gainers [rating] AVGO +11.52% [rating] ANET +9.06% [rating] DLR +7.23% [rating] MPWR +6.68% [rating] TER +6.62% Losers [rating] ULTA -13.37% [rating] KR -3.25% [rating] ES -3.06% [rating] RE -2.75% [rating] MDT -2.49% * * * * Earnings Report Reporting Today Rating Before Open After Close HPE, HPQ, UHAL No earnings reporting today. Earnings Surprises No significant Earnings Surprises in the Russell 3000. * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. 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