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Customers want Nvidia first, 'everything else second': Strategist

Nvidia (NVDA) has etched its name in history by surpassing tech giants Apple (AAPL) and Microsoft (MSFT) to claim the title of the most valuable publicly traded company. The Futurum Group Chief Market Strategist Cory Johnson joins Market Domination to discuss whether this growth is sustainable.

Johnson acknowledges there has never been a company as big as Nvidia that has managed to sustain such a high growth rate. He also notes how quickly Nvidia rose to the top of the market cap rankings. Due to the semiconductor powerhouse's enormous scale the market "is noticing what's going on in this company," Johnson states.

"A reason to look at this company and understand [that] what's going on is so great is to look at the numbers. And look at the growth rate and look at the free cash flow generation, which is the ultimate... success of a business," Johnson told Yahoo Finance. He adds, "And Nvidia is doing all of these things right now."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith

Video transcript

Video, as you mentioned, it's market cap surpassing not only Apple but also Microsoft move bringing NVIDIA to the top spot as the most valuable public company here with more on the fight for the market cap crown.

Let's get to Corey Johnson, the futur group chief market strategist, Corey.

Always good to have you on the show, my friend.

Let, let's just go right there, Corey, I'm interested.

Um You know, you've been covering the markets for a long time.

You've been covering tech for a long time over the course of your career, Corey.

Do you say you know what I I would compare NVIDIA or NVIDIA reminds me of, you know, example A B or C or no, we're in truly uncharted territory.

It's different this time.

You want me to say it's different this time.

You're begging me to say it's different this time.

It's always this time.

But there are always hints in the past.

Look, look the members of, of the.com bubble if you will.

But companies like Dell, companies like Cisco that had absolutely fantastic runs and relatively a lot better financials than some of the companies that are being compared to had runs like this and they went on for years and years and years and they had times when the valuation was stretched and they had times when the valuation, the price was high, but the historic valuation was actually better than it had been.

Um And, and this is the way that industry leaders in new industries go.

Hey, Corey, it's Julie here.

There's also sort of the speed though that we have seen NVIDIA move this time around, right?

So we were looking at the number of days, it took these various companies to get from one trillion to $2 trillion in market cap and then from 2 to 3.

And in, in Nvidia's case, it only took 262 days from 1 to 2 and 96 days from 2 to 3, which is much, much shorter than the others.

So what is that?

I mean, what does that tell us about the sustainability perhaps of, of invidious growth here?

I think it tells us a lot about a lot, but I don't think it tells us anything about the sustainability of the growth.

I think what it tells us about is that the moment that we are in and the reaction to that moment and both of these things are happening at paces that we haven't really seen at this scale.

In the past, we've never seen a company as big as NVIDIA was a year ago, which was very big grow at the pace that has been growing and get to the size of revenues that it has achieved.

We've never seen anything like this and certainly uh to do so with fantastic profitability, expanding gross margins, ridiculous operating margins and tons of free cash flow and yet their customers don't seem to balk at this whatsoever.

We also haven't seen the markets uh recognize uh such an amazing thing but maybe uh it's understandable that the market is reacting to this quickly noticing what's going on with this company because it is so big coy.

Do you think it's a cause for worry for investors when everybody seems to be on the same side of the boat?

Meaning you look at nvidia stock is a monster, nearly 90% of analysts who cover it, say even here buy it at these levels.

You know, is that, is that a reason to worry or you know what sometimes the herd is, right?

Analysts always say buy it.

That's what they say about everything, buy it, buy it, buy it.

They are always to be fair.

Sometimes they say hold, they do say hold you get that.

Yeah, not much how much they say hold more than I know how much should they have said it in retrospect, right.

So I think that that's not a reason to believe that this company is good there, a reason to look at this company, understand what's going down.

So great to look at the numbers and look at the growth rate and look at the free cash flow generation, which is the ultimate value or the ultimate success of a business is free cash flow um uh creation and NVIDIA is doing all of these things right now.

But again, the pace of the growth of this size and what we hear from all of their customers, a future group, we talk to all of Nvidia's competitors and all of their customers and they're all trying to get more and more from NVIDIA and they all want to buy that product first and everything else second and none of them seem to be concerned about the price of what NVIDIA is charging and recognizing that NVIDIA is raising prices, NVIDIA is taking gross margin in ways you rarely see any business do it, let alone gross margin, operating margin as well is just fantastic.