The euphoria in the stock market that puts its value at rock bottom

In recent months, artificial intelligence has captured the attention of the investor public, with particular emphasis on nvidiaa software and chip company that designs graphics processing units, and an API for Data science and high performance computingIn addition to system-on-chip modules for the mobile and automotive computing markets.

company The stock market is up more than 200% in recent months And almost 25% in the past five sessions, immediately after the presentation of the quarterly results that encouraged institutional and retail investors. Nvidia became the ninth company in history to pass an A The stock market valuation is over a trillion dollarsalmost like the entire Spanish stock market.

This has fueled debate throughout Type forums and social networks about whether the tech company’s valuation was justified or whether it set off bubble mode as the dot-com crash did in 2000. Analysts wonder whether their models should be modified for a company that shifted gears to the top. The expected growth in data centers with artificial intelligence solutions.

Nvidia published First quarter revenue was $7.19 billion. beating Wall Street estimates of $6.52 billion. next to, It beat earnings estimates by $1.09 per sharecompared to the $0.29 expected for the first quarter.

But not only that, however The company published a roadmap that attracted most of the investorsExpected revenue for the second quarter is $11 billion, versus the $7.15 billion projected according to market consensus. To this we must add that the company expects to grow an average of 50% more in sales over the next few years.

Something that for some is an unparalleled opportunity and for others very ostentatious claims looking at the current environment. the Semiconductors are part of the AI ​​value chain Which I think presents an attractive risk-reward picture. This field is evolving, so clear indications of where the industry is heading is needed to invest wisely. What is clear is that artificial intelligence will drive exponential growth in semiconductors.

the NVIDIA GPUs are probably the best known, It has been widely adopted for AI applications due to its reputation for high performance and efficiency, especially in deep learning applications; As a result, the company saw a rapid upward revision of its valuation amid market optimism. From there to doubts about her future prospects.

Overrated?

Artificial intelligence and generative AI are exciting new areas of technology development that promise years of growth. Investors could see very high returns, but they should be careful, according to Fidelity: “Some Companies generate a lot of noise, which can lead to relatively poor performance Over time.” That could be the case for Nvidia, in his opinion.

edgar fernandez, Fund advisor Cinvest Third CapitalHe considers the figures unjustified: Nvidia quotes 300 times earnings, 30 times sales, Their revenue is down 10% year over year, and if you do a reverse cash flow discount, you realize the company has to grow 50% over the next 10 years… It’s unreasonable and it’s a bubble.”

For Fernandez, there is no way to defend the Nvidia investment thesis if his accounts are read carefully. “There is no reasonable way to look at the numbers to defend the investment In a company that trades at these multiples (…) the company has to sell for 30 years without incurring any costs to the investor to recover the money at the current valuation,” he asserts.

However, some experts think the investment in Nvidia could be significant, despite its recent takeoff. Gabriel DebachAn eToro stock analyst believes that despite the share price hike, the hype surrounding Nvidia “Showing no signs of backing down, Which indicates the continued interest of investors.”

“Nvidia continues to amaze and becomes the undisputed star of 2023with an astounding growth of more than 180% since the beginning of the year…leaves dead in the gutter, taking second place among S&P 500 stocks with a staggering 119% risefollowed by AMD in third place with a staggering 93%. eToro expert analyzes.

While the S&P 500 only managed modest gains of less than 10%, these industry leaders have created a significant gap from the market average. but this is not all. Nvidia has crossed the trillion dollar market cap markand joining a select club that now includes Apple, Alphabet, Amazon, Aramco, and Microsoft.

Despite the exorbitant estimates, Nvidia continues to surprise and attract the attention of investors, It has exceeded expectations and surprised analysts with an upward revision of the fiscal year, and recently introduced new products at Computex 2023, as well as building supercomputers,” notes Debach. “Despite the share price hike, the excitement surrounding Nvidia shows no signs of abating,” he adds. evidence of continued interest from investors.

In his view, with the spread of artificial intelligence and computing power continuing to increase, the possibilities for businesses and society as a whole are simply mind-boggling. “this It promises a future of innovation, efficiency and unprecedented possibilities, But you have to be careful not to fly too close to the sun and get burned.”

Nvidia monopolizes opinions both ways: pro-necessity-boarding short term trend and detractors, Because complications are completely illogical and untenable. As is always the case in the markets, time is what ends up dictating the final sentence.