Is Nvidia’s Stock Doomed to Collapse? (AI Stocks Are Surging!)

Nvidia Stock: The Poster Child of an AI-fueled Stock Bubble? Is Nvidia’s Stock Doomed to Collapse? (AI Stocks Are Surging in 2023!)

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Nvidia is about to become the 1st trillion dollar chipmaker, after surging $200B in valuation in a single day, and arguably reaching bubble territory. In fact, Nvidia is now more than six times the size of Intel – even though Intel still generates more than two times Nvidia's annual revenue. So the surge in Nvidia’s stock, which has been the best-performing stock of all S&P companies this year, has been nothing short of spectacular.

But the most recent price action also shows why the AI boom is starting to look like a stock bubble which refers to a situation in the financial markets where the prices of stocks become significantly overvalued and simply detached from reality and their intrinsic or fundamental value. Stock bubbles are characterized by a rapid and unsustainable increase in stock prices, often driven by excessive speculation and investor optimism until the enthusiasm reaches a point where it is unsustainable and stocks usually experience massive declines.

Some people claim that Nvidia’s stock is now trading at a price that is completely detached from reality. Nvidia is worth close to 1 trillion USD, and is now worth more than Berkshire Hathaway, Meta Platforms, or Visa, companies with much larger revenues.

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Where will Nvidia's stock go from here?

[PeteLePan]

Nvidia right now is kind of like how Tesla was a couple of years ago. They're a solid stock with lots of potential, but whether they can live up to all the excitement and buzz surrounding them remains to be seen. Time will tell if they can really deliver on the high expectations.

[rainydaycommenter]

Great video.
I was asking this exact question while in the middle of a conversation with someone who was very strongly defending Nvidia's current market position.
Unfortunately, neither I nor the person I was in conversation with could come up with exactly what is so difficult to emulate when it comes to their moat. Unlike Facebook who has a network effect, we could not find anything about Nvidia's moat that is hard to copy or compete for.

[kirankumarsukumar]

I see it reaching 700 by end of year which means its a huge buy right now

[thatgameguy]

Sounds like an AI arms race between the tech giants, winner takes all, and Nvidia is the manufacturer.

[ominollo]

Very good points!
A friend of mine is bragging a lot about his investment in NVIDIA but I still resist 😅
Personally I would consider NVIDIA only if it would trade 10 times lower, probably just a fantasy 😂
Besides that I see limited upside (aka no ten baggers) in the >trillion dollars club.

[jeremynewell]

In the unrealistic scenario in which their revenues go flat I can expect to get my investment back in 200 years. I am not that good at predicting the future.

[kirankumarsukumar]

I think the current price of 400 is cheap. I have the same calculation method as Jeremy from Financial Education. What do you think ?

[hellothere]

Back to 350 very soon looks like the top is in its starting to selloff big.

[formxshape]

Remove the name from the chart, now… would you buy after a sharp uptick? No… that’s FOMO.

[lakeguy]

Nvidia is wildly overpriced. Nvidia is a great company with a near monopoly on Neural Network acceleration hardware but the stock has gotten way way way ahead of itself. Nvidia is a GPU maker that had the foresight to recognize that GPUs (through software) can be used to perform certain math processes (key to training neural networks) in parallel saving time and money. In the future, neural networks will be embedded in many everyday devices and software. Those NNs must be "trained" and Nvidia's hardware will help train them faster saving time and money. But Nvidia stock is priced as if all those future NNs will require Nvidia hardware to run which is simply not true. Broadly speaking, NNs have two phases, training (learning) and inference (thinking). Nvidia is important for training and useful but not needed for doing inference (thinking). Nvidia is priced as if running a neural network for inference / "thinking" requires Nvidia's acceleration hardware which is simply not true.

Sooner or later, the market will recognize this and Nvidia's bubble will pop or at least deflate. People buying today will have to hold for many years to reach breakeven. I would not short Nvidia but I certainly wouldn't buy at these prices. Its helpful to remember Keynes at times like these, "The market can remain irrational longer than I can remain solvent...."