I am so sick, so I will probably return to my coma shortly after finishing this, but I awoke from my slumber to continue my victory lap. I am now up to 20% so far this year :D, and I do see more ahead. Now, we do have to be careful about getting too greedy, and tech stocks in particular the market needs to chill on.

The so-called “Magnificent Seven” are up on average 92% so far this year. Not too bad of a profit if you get in early, but there is no need to buy more. Holding on to these companies is obvious, but frankly, they are maybe a smidgen overvalued right now. Microsoft for example has a PE ratio that is 13 points higher than it was before, but I think out of all of the Magnificent Seven, Nvidia is the one you want to trim your position in the most.

Nvidia has a market cap of $1.22 TRILLION. If you had to guess what their free cash flow was, I would imagine you would guess something over $10 billion, however, if you did guess something over $10 billion, you would be wrong. Yep, their free cash flow is less than 1% of their market cap. On top of that, their P/E ratio is 117. Now, there is nothing wrong with betting on the future, heck, that is all the stock market is, but you have to ask, what is Nvidia’s ceiling? I mean, have they already reached it? I learned this lesson from Disney, but if your stock price is sky high because investors are expecting everything, you have to give them more than everything.

Our old pal, Microsoft, is entering into the AI chip market. Microsoft is making a massive bet on the potential of AI, and they have a ton of money, real money, as opposed to Nvidia. I would not consider it out of the realm of possibility that Microsoft can challenge Nvidia’s dominance. Then, you put other chip competitors on top of that, you put increased China v. US chip warfare, and you have a rapidly souring picture.

Also, I think AI may be getting hyped up too much. AI will have uses, no doubt, I have written about those uses before, but I think too much is being priced in. I am not the only one saying this, there are so many others, but I think it is worth considering.

My point boils down to this, I am seeing what happened to Disney happen to Nvidia. There is too much excitement and too much predicting. I implore you as somebody who held Disney all the way up, and all the way down, you should sell.