Is Nvidia's Skyrocketing Stock Price Sustainable?

Nvidia's stock gains have been incredible

The big story with Nvidia is that it makes high-powered chips capable of running artificial intelligence (AI) applications. AI is a huge story today in the technology sector, with just about every company that can do so either directly working on an AI product or explaining to investors how AI will be a direct benefit to it in some way (by increasing efficiency or automating tasks, for example). Wall Street is highly enamored of AI and anything associated with it.

Ben Graham's Depression-era wisdom

Benjamin Graham is the man who helped to train Warren Buffett and the author of iconic investing tome The Intelligent Investor. To paraphrase that Wall Street giant, even a good company can be a bad investment if you pay too much for it. A great example of that is Cisco Systems (NASDAQ: CSCO).

It would be hard not to notice how similar its rocket-like trajectory is to the Nvidia graph above. But the key feature of this graph is actually not the stock price -- it's the dates. The graph ends with the last trading day of 1999. The next graph brings the story up to the present, and it should be more than enough to frighten any investor who is currently all-in on Nvidia.

Simply put, after that giant peak during the dot-com boom there was a giant crash during the dot-com bust. And Cisco's share price still hasn't recovered all of the ground it lost. If you bought near the peak, you are still in the red on your investment (not factoring in dividends being reinvested).

Don't let FOMO get the better of you. Nvidia may be a magnificent company, but it could still end up being a terrible investment if you pay too much for it.