So yes, that makes it possible for the price to become disconnected from any reasonable prediction.
if volatility is priced at a bargain, investors doesnt care much about the stock, as he will be hedging his delta exposure anyways by means of dynamic hedging/etc
Given the kind of revenue and profit growth forecast NVDA has given, these numbers don't seem terribly far off.
Worth noting that NVDA's profits 8xed in a single year. A lot of people are basing their NVDA valuation based on the past year's revenue, which does make them look extremely overvalued. However, if NVDA has enough sales and enough of a moat to double their profits again, suddenly they'll be biting at Apple's heels profit wise with a much lower valuation.
It doesn't seem like a totally crazy valuation to me, despite the uncertainties involved.
> Stock prices are entirely based on what people think they are worth.
Are are priced on what people think they might be work in the future current financial figures don't really matter that much compared to growth.
And the market is pricing in extremely high revenue growth (and also very high margins). So far Nvidia seems to be delivering. Their forward PE went down several times and it's now "only" 30. A few more quarters like that and the current stock price might seem cheap even by traditional standards.
Obviously it's a risky bet but I don't see what's illogical about it?
Stock prices are entirely based on what people think they are worth.