What happened
Nvidia (NVDA 5.12%) stock jumped as much as 2.2% in late morning trading after the semiconductor star received some positive mentions on CNBC's Squawk Box today.
As of 2 p.m. ET, Nvidia had given back about half its gains -- but what sent Nvidia stock moving higher in the first place?
Image source: Getty Images.
So what
In a word: CNBC.
Interviewed on the financial news network's Squawk Box this morning, Independent Solutions Wealth Management portfolio manager Paul Meeks opined that "whether you believe in AI or VR or AR or the metaverse or whatever," one thing all of these have in common is their "voracious demand for computing power and speed" -- and if there's one thing Nvidia semiconductor chips are known for, it's speed.
As new tech industries emerge, therefore, Meeks predicted that the growing demand for both more power and more speed is going to make semiconductor stocks like Nvidia "less cyclical." The implication: Nvidia stock might still go down from time to time -- that's inescapable with cyclical stocks -- but its lows will be higher, and its highs will also be higher.
Now what
Time will of course tell if Meeks is right about this. But what's most interesting to me is that, in wrapping up his remarks on Nvidia, Meeks managed to keep a straight face while explaining that "Nvidia stock [isn't] particularly expensive right now," simply because it "had been more expensive" a month ago.
Granted, it's true that Nvidia shares today cost 11% less than when they were at their recent high in November. But even so, the fact that this analyst could assert that a stock selling for 93 times trailing earnings is cheap -- and that his interviewer on CNBC accepted the statement without batting an eye -- tells me that irrational exuberance about Nvidia stock is still alive and well. In the near term, that's probably "bullish" for Nvidia's stock price, which may continue to rally so long as investors believe a near-triple-digit P/E can be cheap.
It's the long term I worry about, because it sure looks to me like Nvidia is priced for perfection -- and no stock is perfect, not even Nvidia.
