Nvidia, which has risen 174% this year, has fallen sharply for three trading days.
This brought back concerns about the second dotcom bubble, warned by American economist Harry Dent.
The dotcom bubble refers to the sharp rise and fall of stock prices of IT companies from the 1990s to the early 2000s. It’s similar in that the boom brought about by new technologies led to explosive popularity in the stock market due to the rapid growth of specific companies.
“Flooding the economy with extra money forever might enhance the overall economy in the long term. But we’ll only see when this bubble burst,” he added. “And again, this bubble has been going for 14 years. Instead of most bubbles [going] five to six, it’s been stretched higher, longer. So you’d have to expect a bigger crash than we got in 2008 to ’09.”
“All I see is a bubble of all bubbles. If the bubble bursts, the US stock market could crash by up to 98%,” he added.
Nvidia’s stock price ended at $118.11 on the 24th in the New York stock market, down 6.68% from the previous day. As a result, Nvidia’s market cap has shrunk by 13% to $294.8 billion.
Previously, Nvidia’s stock price rose about 150% this year due to the AI boom, with a 30% increase in the past month since its Q1 (February-May) earnings announcement.
On the 18th, its market cap soared to $3 trillion, surpassing Microsoft and Apple to become the most valuable company in the world.
The recent decline in Nvidia’s is interpreted as a result of profit-taking following its sharp rise. Experts analyze it as a temporary adjustment as no major fundamental changes exist.
Bank of America maintained its buy rating and $150 target price, noting, “Profit-taking is coming out due to Nvidia’s steep rise, but volatility will end in a short period.”
Investment bank Jefferies also maintained its Buy rating on Nvidia and raised its price target from $135 to $150.
