On a technical-level, $NVDA is absolutely ridiculous. It's valuation is on-par with it's 2021 peak when the GPU shortage was at it's peak, and it's up almost 100% YTD with its inventories ballooning. Of course, trying to short a company just because it's over-valued or overbought is a fool's errand. You'll quickly find out that great stocks can simply keep going up for months on end. That's why you need a spark, or a narrative shift to get the ball rolling for the stock to reverse.
Fundamentally, $NVDA's enormous bounce has been attributed to Chat GPT and the recent AI movement. Just to be clear, I'm bullish on AI. (not $AI lol) However, up until now $NVDA's narrative has been that they will be the biggest, if not the sole, chip benefactor of the AI wave. Their A100 chip is the bread and butter for AI development while their H100 chip is the much beefier, enterprise-focused one. Don't get me wrong, the H100 is quite amazing and it's recent release will be hard to catch for some time. However, up until this point it's been thought that their lead in chips over AMD and Intel would grant them a large revenue boost over the next few years. Google's timely outperformance of the A100 is a testament that challengers are emerging. Nvidia's lead might end sooner than expected.
As we all know, once a technology trend catches on - the big tech players catch on and move quickly while deploying mountains of cash. Whether it's Apple, Microsoft, or Google - they will compete if the TAM is large enough. Whether it's Microsoft squishing out Zoom and Slack, or Apple ousting Intel CPU chips, or Google leveraging YouTube to compete against TikTok - these corporations do not hesitate to compete at any large opportunity.
I think tonight, the narrative has shifted for AI chips. I think we can all agree that big tech truly understands the dramatic paradigm shift that this AI wave will be. AI has been on the backburner for years up until Chat GPT recently proved that it's coming now. Therefore, would it be surprising that these corporations will try to develop their AI-chips in-house? Apple did it for their CPUs in their macs, thanks to TSMC. If Nvidia controlled and manufactured its own fabs then this discussion would be irrelevant. But that's not the case. Google has apparently already caught up to the A100 with their chip designs. What about Apple or Microsoft? You think they're content with continuing to dump fortunes on Nvidia chips if AI is the future? Of course they're going to develop their own chips in house as well. Hardware is key. That's been a turning point for Meta, and is a large reason they're trying to make VR work. You need to control both the hardware and the software.
tl;dr: OTM Puts on $NVDA for May or June 2023. Expect a 20-30% drop in the coming weeks.
[link] [comments] https://www.reddit.com/r/stocks/comments/12c6s85/nvidia_nvda_is_the_best_riskreward_short_over_the/
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