Trump Media and Technology Group (DJT) Is Massively Outperforming NVIDIA Right Now, but Don’t Bet on a Hype Demise Just Yet

This is not intended as investment advice. The author does not hold any positions in the stocks mentioned.

It may come as a surprise that Trump Media and Technology Group (NASDAQ: DJT), the controlling organization behind the Truth Social platform with minimal profits, has surpassed the current leading market player – NVIDIA, a multi-trillion-dollar AI company. However, those expecting a correction in the market should exercise caution and refrain from making hasty decisions to avoid potential losses.

Despite previous delays, Trump Media and Technology Group successfully completed its reverse merger with Digital World, a SPAC, last week. The combined company’s shares debuted on the Nasdaq exchange on Tuesday, providing an update for those who were not aware.

Despite this, the stock has experienced a significant increase, resulting in a substantial increase in Donald Trump’s net worth thanks to his large ownership of 78.75 million shares in the company.

The Legal Battle Between Trump Media and Technology Group and NVIDIA

Trump Media and Technology Group vs. NVIDIA

The chart clearly shows that Trump Media and Technology Group shares are currently outperforming NVIDIA’s. Trump Media and Technology Group has gained 280 percent year-to-date, while NVIDIA has only gained around 90 percent.

Despite recording only $2.30 million in revenue in the past twelve months, Trump Media and Technology Group’s current market capitalization of $8.66 billion results in a Trailing Twelve Months (TTM) Price-to-Sales (P/S) ratio of 3,765.22. This is significantly higher than NVIDIA’s TTM P/S ratio of 37.04, highlighting the stark difference in valuation between the two companies.

The Persistence of Irrationality: Why This Trend May Not End Anytime Soon

According to popular belief, the market can remain irrational for extended periods of time, surpassing an investor’s ability to stay financially stable. This saying holds even more weight for Trump Media and Technology Group.

At first glance, it may seem like a no-brainer and a guaranteed move to purchase put options on the booming stock. After all, the company’s warrants are expected to become available for sale in approximately a month, which will lead to a surge in profits and potential dilution. Additionally, in about six months, the majority of insider shares, including Trump’s significant ownership, will also become available for sale, creating significant obstacles. However, this stock’s value is primarily driven by Trump’s celebrity status and political maneuvers rather than solid financial fundamentals. In other words, the current hype surrounding the stock could continue for a considerable amount of time.

Furthermore, it is not financially sound to purchase puts at this point, taking into consideration the extremely inflated implied volatility surrounding options for Trump Media and Technology Group. The excerpt above outlines the current implied volatility (IV) for 25-delta puts and calls. Generally, the higher the demand for specific options, the higher their implied volatility. Additionally, 25-delta options carry a 25 percent likelihood of expiring in the money. As evidenced by the aforementioned excerpt, the implied volatility for puts on Trump Media and Technology Group is currently higher than that for calls, indicating a higher cost for these options.

Based on these factors, purchasing puts is not a highly appealing option currently, as elaborated on in this Reddit discussion. Therefore, it is probable that the show will persist for the foreseeable future.