-
Nvidia shares are sending a sell signal, says strategist Bill Blain.
-
Blain cites the high valuation of Nvidia and its wealthy employees as reasons for bailing.
-
He says the chipmaker’s stock price surge marks the culmination of a decades-long market cycle.
According to veteran strategist Bill Blain, Nvidia stock is giving a big ‘sell’ signal to investors.
Blain, the founder of Wind Shift Capital and longtime financial strategist, pointed out in a note Tuesday that Nvidia’s sky-high valuation has made many of its employees very wealthy. He pointed to a recent poll that found that 40% of those who worked at Nvidia had a net worth between $1 million and $20 million, while 37% had a net worth of more than $20 million.
Blain said this means less than a third of Nvidia’s workforce “experiences any real day-to-day financial pressure on them.”
“Do you think so? poor neighborhood of the Nvidia people are really going to bust their guts for guys who are already rich and highly motivated to protect their wealth and position? Do they think Nvidia will rise another 700%? Will they be happy that they remain extremely poor compared to their peers and bosses? Or is it more likely that the enormous wealth in the office means that the poorer but still highly motivated staff comes to think that their opportunities for prosperity will be better elsewhere?,” Blain wrote.
Nvidia’s massive valuation could also signal a spike in the broader stock market, Blain said. While investors price in ambitious rate cuts in the coming year, policy easing will likely be “limited” by the Fed, he said, adding that he believed rates of 4% to 6% would be the new normal for the market.
“Some people think lower interest rates, as promised by the Fed later this month, will mean unlimited joy for the markets. (I think it could still be a sell-the-fact moment.)” Blain said. “And many, including myself, believe that a new long-term economic cycle could reverse the past four decades of reduced inflationary pressures.”
The markets began their current long-term cycle in the 1980s, when inflation fell steadily after a difficult inflation period in the previous decade, Blain said. He suggested that markets could enter a new cycle as early as 2025 inflationary pressure as a result of geopolitical tensions, raw materials and the rising US debt balance.
“I just found my best reason to sell Nvidia, which is confirmation that we are at the top of the market. What could happen next? How about twenty years of rising inflation, rising interest rates and a global super cycle for raw materials, while countries do their best to secure future strategic resources?” he added.
Other strategists have warned of persistent inflationary pressures despite a downward trend in price growth from the 2022 peak. Inflation could see a revivalBlackRock strategists previously predicted, pointing to the risk of a major spike in oil prices and demand outpacing supply in the U.S. economy.
Read the original article Business insider