[huijzer]

My guess is that retail investors buy without thinking about the price and institutional investors play along.

For some reason, retail investors look at the price when buying a car, but not at the price of a company when buying a stock. At the same time, institutional investors focus on the near-term due to misaligned incentives. As Warren Buffet put it in 1985, institutional investors can't wait for a good long-term deal or people will start shouting "swing you bum" [1]. So, the whole system is in some kind of crazy frenzy of pumping up the price until it burst. If it bursts, the institutional investors are the first to leave or obtained their fees.

Long story short: I think you understand it perfectly well. Buying Nvidia at a 200 PE ratio makes no sense from a valuation standpoint.

[1]: https://youtu.be/T6HHwOoq9M4

[asdff]

To use a Drake lyric, retail investors are in it "for a good time not a long time". They don't care what the PE is. They don't care what the price is. The volitility is the entire opportunity. You jump into the meme stock and diamond hand your holdings, and just look it pumped 25% today. Its a gamble, that's why it makes no sense to traditionally minded investors like yourself and not gamblers who consider things like potential payouts multiple times over their initial bet, and are buying nvda calls right along side them betting on games through draftkings. If you had like $500 money you could stand to lose, why not role the dice? $500 in options for nvda yesterday would have made you like $10k today, or if you set a stop loss at say 20% you'd only be out $100 for that gamble. It almost makes less sense to sit on the sidelines considering these fixed losses and unlimited profit potential with call side options on a stock that's being actively memed. Have one of your runners pop off then all your picks from there can be made with house money.

[thunky]

> For some reason, retail investors look at the price when buying a car, but not at the price of a company when buying a stock.

This because these are very different processes from the buyer's perspective:

A retail stock investor primarily decides to spend $x on some ticker, and then they divide $x by the current share price to determine how many shares to buy (or they buy fractional shares if their platform supports it). So they can "own" NVDA by paying whatever amount they choose.

This is the opposite from buying a car, where the buyer has to pay the full sticker price all or nothing.

[meltyness]

I don't think you can say that based on how many A100s you own. Perhaps with more A100s, you could confidently say what the PE should be, rather than simply claiming it's too high.