Nvidia (NVDA) has had an historic run over the past week as strong guidance fueled by the excitement about the company's artificial intelligence prospects has the stock knocking on the trillion dollar door.
The company's rapid rise over the past week and a half has raised its price to earnings ratio and price to revenue ratio into levels financial advisers would normally say are to high to be sustainable.
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Peter Mallouk, a financial adviser who heads CPI Wealth, points out that Nvidia currently has $26 billion in sales and is now trading at over 38 times sales and over 200 times earnings.
Mallouk says that his firm has "never before seen a price to sales ratio that high for a company of its size."
But the big problem, according to Mallouk is that investors have seen this story before with another one-time market darling: Tesla (TSLA).
Tesla hit the $1 trillion market cap mark back in 2021 with a 30-to-1 stock price-to-revenue ratio that is similar to the figure Nvidia sports currently.
Since then, the stock has shed about 70% and its price-to-sales ratio is at a much more attractive 5 times.
Mallouk points out that he made the same observation he's making about Nvidia now nearly a year ago when he called Tesla the next Netflix (NFLX).
Despite the fact that Netflix is having a strong 2023 -- the stock is up nearly 40% year to date -- shares have dropped nearly 40% from their all-time highs from 20 months ago.
