Why Nvidia’s rise is similar to the dot-com bubble

With Nvidia up over 154% year to date, Stifel managing director and chief equity strategist Barry Bannister joins Morning Brief to give insight into Nvidia's (NVDA) recent moves and how the tech giant reminds him of Cisco's (CSCO) performance during the dot-com bubble.

"What happened with Cisco (CSCO) is, and same thing happened to Microsoft (MSFT), and Amgen (AMGN) and a number of other big cap stocks, is their PE multiple was too high and they earned into it over the course of the next 15 years. So the earnings went up dramatically, as was expected. This happened with the nifty 50 stocks in the early 70s. They earned very well, but their PE multiples were too high ... those companies had these mid-30s, 40-time multiples. They earned into it over the course of a decade," Bannister explains.

He outlines the similarities between the dot-com bubble and the AI sector today: "But what we have today is extreme optimism on new technology. Then it was the internet, now it's AI. Narrow markets, increasingly narrow markets with a high valuation. Equity ownership was very high. And the day traders and all that. I'm just saying that you have to have been there 25 years ago to remember that it was a very similar feeling environment today."

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[mlee]

They are building the chips and software and models for all industries.

[dgaz]

If you think Nvidia does not realize this, you don't own the stock.

[hana_moon]

this guy missed the whole train and it hurts every night

[jeffcann]

Bubbles always go longer than you think. We could easily be in the equivalent of 1996 or 1997 right now.

[holysmokesturbo]

Dude is a bozo who doesn't know what he is talking about.

[cya]

The build out to AI is taking many years with several iterations. Its an immense cash cow. We are far away from the point where ai infrastructure becomes a commodity.

[MarcelinaMakowski]

That's more than 100 times the S&P 500 index's return of 230%. Put another way, a $1, 000 investment in Nvidia stock a decade ago would now be worth more than $250, 000. A stock's past performance is no guarantee of its future performance. I'm glad I was working with Cynthia and she encouraged me on these Nvidia stock.

[archerman]

First, while AI may not immediately drive massive profit increases for companies, it's becoming essential for business survival. Any company that ignores AI, risks losing relevance, as it will be critical for retaining customers. In the long term, companies that adopt AI will likely capture customers from those that missed the opportunity. Second, GPUs have a limited lifespan and need regular replacement to maintain performance. Many non-tech strategists missed this fact. Companies investing in NVIDIA now are likely committed customers for at least a decade, unless they eventually choose to develop their own chips....like what META is trying to do

[saibalmitra]

Companies who bought NVDA's GPUs have spent $100 billion so far and they have only earned $3 billion revenues so far. The end consumer isn't all that keen on paying for the new AI-powered products and services. That's why Apple, Microsoft, Google etc. are all rolling out free of charge AI-powered services. Retail is buying NVDA shares like crazy, but they are not buying any of the AI-powered products or services that depend on NVDA's GPUs.

[stevekowalski]

Nvidia only goes up, it will never go down, you should all be buying the dip

[robertoarat]

Mr Barry has been negative with the overall market on every guest appearance still keeps on yapping comparing nvidia to Cisco..😂

[bpolat]

Too much hype on Nvidia. When Intel stock price hit 72$ on 25 august 2000, investors were thinking same. it is unbeatable as everybody on planet needs a computer and only Intel makes best CPUs. After 24 years, Intel made so much more revenues yet never saw 72$ per stock still trading less than half. Upcoming years all major chips companies will hit market with new GPUs. While one company sells extremely expensive GPU with astronomical profit margin others will not sit and watch.

[jameswang]

Nvidia is doing HPC (high performance computing) chips. HPC has evolved to analytics (AKA big data) and now AI. People are just buying more hardware for their analytics under the name of AI. There are not a lot of massive deployment of tangible AI products yet, except potentially Apple in the fall. AI beyond analytics is real, but its real life adoption will take time, just like analytics. The key is software, not hardware. Nvidia is no software company.