Good companies, and good valuation

The Russia-Ukraine war has taken the world by storm, and has also shaken markets across the world. It's a reminder to all of us that anything can happen in this world, and these things affect lives, markets, and also the value of our investments.

Now, the rise in AI stocks fuelled by ChatGPT has caused powerhouses like $NVIDIA (NVDA.US)$ and $C3.ai (AI.US)$ to rise greatly in value. It is indeed true that AI has seen new breakthroughs this year, and we can surely expect higher expectations of AI tech companies in the coming months.

However, we need to remember that a good company is not necessarily at a good valuation, and both are required to make a good investment. For example, $NVIDIA (NVDA.US)$ trades at a forecasted 12-month forward PEG ratio of about 2.91 according to Nasdaq.com. Generally, A PEG ratio above 1 is considered to be overvalued, even after pricing in potential growth in the company's earnings. As such, one may need to reevaluate if an investment in such a company is a worthwhile one.

Nothing to fear though! We can always sell puts, or simply search for another company with better valuation. The future is bright for tech! The valuation just needs to be accurately reflective of the company's future potential.

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alaric

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