When the party stops

When the party stops

The parallels between this cycle’s tech wunderkind, NVIDIA and yesteryear’s CISCO are not new, but worth repeating. As no group can out grow the market in perpetuity, the question always remain as to how far out will markets choose to reach out into the uncertain future to fix their horizon values. On past performances for these current ‘super-normal’ growth businesses, there seems a systematic relationship between these horizon points and the rates of organic sales growth being delivered. IE the faster the growth, the further out investors will reach to discount that growth and indeed in a linear fashion. What is less predictable however, is anticipating when the growth surge will start to mature, so hence the sensitivity to any signs that the party may soon be over as we’ve seen with the nervous reaction to NVIDIA’s Q3 guidance yesterday.