Is Nvidia stock a bubble? Legendary investor: Once it breaks, it will trigger a full-blown crash

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Source: Financial Associated Press

Author: Huang Junzhi

Rob Arnott, the legendary investor and chairman of investment firm Research Affiliates, has warned that Nvidia (Nvidia) stock has formed an asset bubble after a stunning rebound this year, and if the bubble bursts, it may trigger more turmoil. Widespread market crashes.

He classified Nvidia stock as a "textbook market delusion." This year, Nvidia’s stock price has risen as much as 228.75% due to the hype of artificial intelligence.

"Will Nvidia's crash drag the market down? It's very likely," he said.

Research Affiliates is an outsourced consultant of Pacific Investment Management Corporation (PIMCO), a large American asset management company. Founded by Arnott in 2002, it is a research-based asset management company focusing on innovative asset allocation and alternative index products company.

In fact, Nvidia's valuation has soared to sky-high prices driven by investor excitement about artificial intelligence, and several market commentators have sounded alarm bells for the company. Traders believe Nvidia, the leading chip maker, is indeed well-positioned to take advantage of a widely expected surge in demand for high-end computing equipment related to artificial intelligence.

But some experts say the company's stock price is ridiculously high and its valuation simply unrealistic. The stock trades at about 117 times earnings, compared with 26 times for the S&P 500 as a whole.

"Overconfident markets, paradoxically, translate brilliant future business prospects into even more brilliant current stock price levels," he said, adding: "Nvidia is today's poster child for its type: a company that the market prices for greatness beyond perfect (prospects) company."

Investors are flocking to Nvidia in part because its $1.2 trillion market capitalization makes it a "safe investment," he said. However, it is not "too big to fail."

"Our risk is, Nvidia has done incredible things, but maybe it goes up another 10x in the next 10 years? I would say that's not credible, so I would feel comfortable calling it a bubble," he added .