When The CEO Signs a Girl’s… Is It The Top?

Fame is a drug and Jensen Huang might be falling victim to it. The renowned CEO of Nvidia has been captured autographing the… let’s go with the word “chest” of a woman. Some are claiming that’s the sign a market top is in…. when the boss of a semiconductor company has become so lauded that women are clamoring to have him sign his name on their bodies. Perhaps they are right?

Another notable fact is that Nvidia this week eclipsed Apple in terms of  market capitalization. Despite generating five times more revenue and three times more sales, Nvidia rose to the $3 trillion mark, passed Apple, and kept going.

Are these the signs that the top is in?

Key Points

• Nvidia CEO Jensen Huang’s public antics, like autographing a woman’s chest, suggest a potential market top.
• Nvidia recently exceeded Apple’s market capitalization despite lower revenue, raising questions about its valuation.
• Despite concerns over Nvidia’s valuation, its strong momentum suggests betting against it is too risky.

Guessing Game Strategy

While the signs of a top may appear obvious in retrospect, the danger of attempting to pick the peak is that bullish momentum can remain strong for much longer than most anticipate. It’s for that reason Jesse Livermore famously stated the market can remain patient longer than you can remain solvent. Always trying to pick the top and bottom is a sure-fire recipe for disaster.

Even the best traders in the world don’t attempt to do so. Rather they wait for the market to dictate that it’s time to act. That means waiting for a breakout to higher highs, or a violation of a trend line or some other criterion. If you keep guessing though you can surely be right as the clock strikes 12 twice a day but it’s a broken strategy.

Once you have clear rules as to how to take action, you simply need to stick to them. And for now, nothing in the rules of a disciplined trader says sell, even though every pore of your body may be screaming to do so.

Of course, someone will time the market perfectly with the guessing game strategy but it’s not a formula for long-term success.

Is The Top In?

And for those who look to the fundamentals of Nvidia and scream it’s overvalued, the argument against them is that the 5-year discounted cash flow forecast analysis estimates Nvidia will report $119 billion in annual profits while Apple will deliver $128 billion.

Given that Wall Street values profitability and cash flows above all else, Nvidia’s future profitability signals that its market capitalization rivaling Apple’s is not altogether outlandish.

A lot can change over the course of those five years and derail the progress Nvidia has made. Perhaps it’s rival AMD springing up to compete vigorously or falling demand from a recession or simply the lack of capital to afford the $30,000 chips at scale.

Whatever the reason, the risks to perfect execution are real but for now, the stock is saying higher for longer, and until it pulls back and violates its up-trending support line, it’s dangerous to bet against it.