So here we are, another company making the headlines and sending tidal waves through the financial market. Nvidia stock price has surpassed all expectations in the past five years, with its value rising over 3,000%!
Like Tesla’s dominance in the electric vehicle market or Apple’s supremacy in the smartphone world, now it’s Nvidia’s turn to exert its power in the semiconductor and AI fields.
Such a surge in price action saw them briefly overtake Microsoft and Apple as the world’s most valuable company before slipping into third place. However, Nvidia stock could quickly jump back into the top spot as the stock can hit new heights as we head into the year’s second half.
Why has the Nvidia stock risen so rapidly?
If we look back at their origins from 1993, Nvidia has solidified their position as a dominant player in the industry. The scramble among tech giants like Microsoft and Amazon for the lead in Artificial Intelligence development has led to a surge in demand for Nvidia’s chips, propelling the company’s revenue to unprecedented levels.
The company’s value has risen 166% this year and over 200% in the last 12 months.
Nvidia’s value has already risen over 150% this year, breaking the $100 level in May.
Not many stocks have risen in such a bullish line, but looking at the rise of Nvidia from the beginning of the year, there are not many pullbacks. Any sell-offs that have occurred seem to be temporary since the price has gone from strength to strength.
Is the AI bubble about to burst?
In the past few weeks, Nvidia rapidly lost about $500 billion in its market cap. It came with growing concerns that the company has become overvalued or, even worse, that the AI bubble is about to burst.
Comparisons with the early 2000s internet dot-com bubble show similarities; however, the dynamics of the AI revolution are evident. Unlike the dot-com era, AI is about what is coming on the horizon, with no signs of a slowdown in innovation and demand as the pace of innovation is much faster due to the use of the internet.
Companies are much more established than they were 25 years ago, as at the bubble’s peak, only around 15% of those companies were profitable and had a long-standing history. Investors are also wiser about what could happen since the previous bubble burst and are more hesitant about where they put their money.
Can Nvidia Stock Sustain Its Growth?
Valuations and equity flows suggest that Artificial Intelligence differs significantly from the dot-com bubble.
However, there is always the worry that the market could turn around. When trading CFDs, especially stocks, traders need to know when a market could burst. For instance, only 30% of tech companies that went public last year were profitable. Investors should keep a diversified portfolio for their trading account to mitigate risk.
Fundamentals don’t matter until they do, and there is the worry that Nvidia stock price will go too far, too fast, and too soon. If the stock was to tank, we must look at the indices involved to see how they would be affected. The Nasdaq plummeted by almost 80% in the dot-com days and erased all the gains made during the boom.
The real test will be whether Nvidia can maintain the momentum or if the rally fades out, as we have seen many times before.
Test your trading strategy on forex and stocks with Orbex
The post Nvidia Stock Analysis: Opportunity or Financial Bubble? appeared first on Orbex Forex Trading Blog.
