At the center of the AI storm sits Nvidia. The chipmaker has become the first company to hit a $4 trillion market valuation (and recently referenced as $4.5 trillion), surpassing the GDP of most countries. But comparisons to Cisco Systems in 2000 are growing louder. Klarna CEO Sebastian Siemiatkowski singled out the company, stating that its valuation makes him “nervous” and questioning the “automatic” wealth flowing into it.
The bull case for Nvidia is endless demand for AI chips. The bear case, now gaining traction, is that this demand is a one-time infrastructure build-out that will inevitably plateau. If the hyperscalers (Google, Microsoft, Amazon) cut back on spending—as hinted by Pichai’s comments on “irrationality”—Nvidia’s revenues could collapse, taking its stock price with it.
This single stock has become so large that it poses a systemic risk. A 20% drop in Nvidia would drag down the S&P 500 and Nasdaq significantly. This concentration risk is what keeps fund managers up at night and is a primary driver of the “AI Bubble” tail risk identified by Bank of America.
The crypto market is already showing what happens when a high-growth asset loses momentum. The 27% drop in Bitcoin is a preview of what a high-multiple stock correction looks like. Traders are watching Nvidia’s next earnings report with bated breath; any sign of weakness could trigger the correction Daniel Pinto warned of.
For now, Nvidia is the king of the market, but as history shows, heavy is the head that wears the crown.
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