NVDA: Be Cautious about the Bubble!
$NVIDIA Corp(NVDA)$
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]
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- EllisBird·03-28👍LikeReport