Nvidia, known for its AI chips, surpassed a market value of 3 trillion USD in the second quarter, reflecting Wall Street’s strong confidence in artificial intelligence.
The company’s shares have risen by 37% in the last three months and more than doubled this year, increasing by 148%.
Critics wonder if Nvidia’s rapid rise is a bubble. Its value of $3 trillion exceeds the net wealth of Sweden and almost matches Africa’s GDP in 2023. This valuation equates to over $100 million per Nvidia employee, highlighting its dominance in the sector.
Investment strategies are centered around Nvidia. Funds like ProFunds Semiconductor UltraSector, which use 150% leverage for Nvidia exposure, have seen a 31% profit in the last quarter. However, skeptics like T. Rowe Price Capital Appreciation have started reducing their positions, citing risks to Nvidia’s profit margins from intensified competition.
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While Nvidia’s results have supported funds for significant growth, providing a 4.9% average quarterly return, caution regarding sustainability persists. Some, like Vanguard Primecap, have recently reopened to investors, emphasizing diversification beyond Nvidia for long-term stability in growth investments.
In a market driven by AI ambitions, investors should carefully navigate the fast-growing Nvidia shares, considering broader economic changes and sector-specific challenges that may impact the development trajectory.
