NVIDI-wha?
On May 24th, NVIDIA’s price chart went vertical after the company reported analyst-humbling revenue and record-breaking forecasts. Over the following weeks, as it became clear the chipmaker would be the pick-and-shovel supplier of the oncoming AI gold rush, its stock price kept rising. And now the company sports a shiny, new four-comma valuation.
The news caused a tidal wave of frantic Googling amongst the amateur investor class, since nobody on this side of the accredited tracks could speak intelligently about NVIDIA. Are they a tech company? Hardware of software? What’s a GPU again? Everyone but analysts and gamers would’ve guessed that Jensen Huang was a third-rate electronics brand, not a leather-clad billionaire.
But ignorance can be a good thing in investing, a peculiar field where you don’t have to be a pro to achieve outsized returns. In fact, knowledge and alpha can have a negative correlation (the green lumber fallacy is real). Usually, all it takes is diligence (consistent saving over time) coupled with a healthy dose of discipline (not panic selling) and a sprinkling of diversification (index funds) to be a stock market millionaire.
If you missed NVIDIA’s 300% jump, pouring over 10-K’s and reading the WSJ cover-to-cover probably wouldn’t have helped. And since the graveyards are full of middling swordsmen, it may be best just to stay out of the arena altogether.
Devin Faddoul, CFP® is the founder of Adda Financial | Outsource your financial life. Focus on your real life.