NVDA: Be Cautious about the Bubble!

skythelimit
03-28

$NVIDIA Corp(NVDA)$ stock has soared, thanks to AI, but may be in a bubble[LOL][LOL][LOL]

Over the past 30 years, there hasn't been a single next-big-thing trend that didn't involve an early stage bubble. History has shown that investors have a terrible habit of overestimating the adoption/uptake of a new technology, trend, or innovation. Artificial intelligence is unlikely to be the exception to this unwritten rule.

But there's more to be concerned about than just historic correlations. There's the real potential for Nvidia to cannibalize its own gross margin as it expands production of its prized GPUs and newly introduced Blackwell chip. GPU scarcity was the core driver of data center sales growth in fiscal 2024. As external competitors enter the space and Nvidia ups its own output, this scarcity will dwindle and, more than likely, erode some of its gross margin.

Worse yet, Nvidia's four largest customers by sales -- $Microsoft(MSFT)$ , $Meta Platforms, Inc.(META)$ , $Amazon.com(AMZN)$ , and $Alphabet(GOOG)$ -- are all developing AI chips of their own. These "Magnificent Seven" components are either going to lessen their reliance on Nvidia in future years or entirely replace its infrastructure in in-house data centers.

All of these factors suggest that Nvidia stock may be in a bubble.[Drowsy][Drowsy][Drowsy]

AI Companies and Industry DIG
AI is a marathon, not a sprint, it's a mega trend. Please share you Insights or comments on companies or technologies of AI industry.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

Leave a comment
1
7