To The Moon

The semiconductor industry is inherently cyclical, with each full cycle typically lasting 3 to 5 years. Since 2008, the global semiconductor market has gone through four complete cycles, each marked by booms driven by technological innovation and busts caused by oversupply or global economic slowdowns.

The current cycle, by most estimates, bottomed out in Q1 2023. With AI hype, GPU demand, and data center expansion, NVIDIA (NVDA) quickly became one of the top beneficiaries of this cycle’s upswing. But now the narrative is shifting again—is it too late to buy? Or is it time to cash out while ahead?

The Bull Case: Why Some Think It’s a Bargain?

To be fair, there are reasons some investors might still consider NVDA attractive—even at current levels:

• AI Demand is Real: NVIDIA’s GPUs are still the gold standard for training large language models (LLMs), powering generative AI platforms, and fueling AI infrastructure globally.

• Blackwell Chip Launch: The upcoming Blackwell architecture could extend NVIDIA’s lead in AI hardware, keeping it far ahead of AMD, Intel, and even custom chips by hyperscalers.

• Valuation Metrics: While NVDA's price-to-earnings (PE) ratio may appear high historically, it’s arguably reasonable when accounting for future growth—especially when adjusted for AI-led demand.

That said, I’m personally not buying at these levels—and here’s why.

Why I’m Not Touching NVDA Right Now?

1. The Price Still Feels Too High

NVIDIA closed at $94.31 last week, down 7.36% in a single trading day. And it's still falling in overnight trading, with the drop exceeding 5%. While that kind of volatility might scream "buy the dip" to some, I still find the price expensive.

NVIDIA (NVDA)

Let’s not forget: in early 2023, you could buy NVDA at a lower price (split-adjusted). The 52-week range sits between $75.61 and $153.13, and while $90 may seem like a "discount" compared to its highs, it's still far from the levels pre-AI hype.

As someone who avoids the "buy high, sell low" trap, I’m not ready to buy just because the stock pulled back a little.

2. Tariff Risks and Geopolitical Uncertainty

Semiconductors are at the center of a broader geopolitical chessboard. If there is renewed U.S.-China tensions, and with tariffs on the table, NVIDIA could be caught in the crossfire.

There’s already talk of restrictions on high-end GPU exports to China, which is a meaningful market for NVIDIA. Tariffs and regulatory constraints could dampen future revenue, reduce margins, or disrupt the supply chain.

While NVIDIA has diversified its customer base, geopolitical risks introduce uncertainty—something I try to avoid, especially in an already-volatile sector.

3. Low Dividend Yield

One of my investing principles is favoring income-generating assets. NVIDIA’s dividend yield is negligible—barely noticeable for income-focused investors.

Yes, it’s a growth stock. But for someone who values passive income, I prefer ETFs or companies with higher and more reliable yields—especially in this kind of interest rate environment, where I can get higher yields from bonds or high-yield ETFs without taking on tech stock risk.

4. Caution Around Overhyped Tech

I’m wary of what I call the “tech hype trap.” Stocks like NVIDIA become media darlings during AI and innovation waves, but that often leads to frothy valuations that can reverse just as quickly.

Right now, I’m seeing shades of 2021 all over again. Back then, everyone piled into Tesla, ARKK, and speculative tech—until reality hit in 2022.

While NVIDIA has stronger fundamentals than many "story stocks," that doesn’t mean it's immune to overvaluation or a major pullback if investor sentiment turns.

5. Recession Concerns Still Linger

There’s still a real possibility of a recession or at least a slowdown. The effects of tight monetary policy often show up with a lag, and some leading indicators (like yield curve inversion) are still flashing warnings.

In a slowing economic environment, companies that trade at high multiples and rely on continued growth—like NVIDIA—can underperform significantly. Investors may rotate out of growth into value, defensive sectors, or fixed income.

What Would Make Me Reconsider NVDA?

While I’m not buying now, I’m not completely writing it off forever either. Here’s what I’d want to see before reconsidering:

• A price correction to below $50, ideally below $40, where risk-reward improves.

• A potential dividend boost, or signals from the company that they’re open to shareholder returns.

• Signs of stabilization in margins, especially as the new Blackwell chips roll out.

Until then, NVIDIA is on my “watch, not buy” list.

So… Add at $90 or Sell Now?

If you’re already holding NVDA from earlier levels—congrats, you’re sitting on major gains. But now might be a good time to re-evaluate your position:

• Is NVDA overweight in your portfolio?

• Are you still bullish on AI and semiconductors for the next 3–5 years?

• Can you handle more volatility if a recession hits or if AI hype cools off?

For me, I’m staying on the sidelines. There are other opportunities in the market offering better value, higher income, and less hype right now.