Nvidia stock has a bubble, and if it pops, it could trigger a total market crash, says investment legend Rob Arnott.
With sky-high valuations, the chipmaker branded the company a “textbook story of Big Market Delusion.”
“Will the emergence of Nvidia bring down the entire market? “Very likely,” Arnott said.
Nivea’s shares have formed an asset bubble following this year’s spectacular rally – and if it pops, it could trigger a broader market crash, according to investing legend Rob Arnott.
Founder of Research Associates has classified the semiconductor stock as a “textbook story of Big Market Delusion” thanks to AI hype, which has more than tripled this year. Bloomberg reported.
“Nvidia’s Emergence: Will the Market Take Out the Entire Market?”
Many market analysts sounded the alarm when Nvidia’s valuation skyrocketed due to investor excitement over artificial intelligence. Marketers see the chipmaker as well-positioned to take advantage of the widely expected surge in demand for AI-connected high-end computing devices.
Some experts say that it is the company’s stock price Funny high And his assumption is simply unrealistic. Nvidia’s shares are up 232% so far this year, outperforming other components of the S&P 500 index by a wide margin.
The stock’s price-to-earnings ratio is about 117, compared with 26 for the overall S&P 500 index.
“Overconfident markets paradoxically translate future business prospects into brighter current stock price levels,” he said in a separate note cited by Bloomberg. “Nvidia is today’s epitome of that genre: a big company with value over perfection,” Arnott added.
Investors are piling into Nvidia with a market cap of $1.2 trillion, making it a “safe play,” he said.
However, “it’s not too big to fail,” but Nvidia is “too big to fail,” Arnott said.
“The risk that we’re wrong, NVD is going to go up to amazing things and it’s going to go up another 10 times in the next 10 years,” he said. “I would say it’s not convincing, and so I call it a bubble,” he added.
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