The stock price of Nvidia, the leader of AI (artificial intelligence) chips, has repeatedly reached new highs, and some doubts have also sounded in the frenzy of the market sentiment.
On March 7th local time, NVDA's stock price hit a new high, breaking through the $900 mark for the first time and closing at $926.69 per share, an increase of 4.52%. The total market value reached $2.32 trillion, which is less than $300 billion from Apple's $2.61 trillion market value. According to Wind, Nvidia's stock price has risen by 87.14% since the beginning of this year.
Nvidia's recent stock price increase was driven by its stunning financial performance. Nvidia's fourth quarter financial report for the 2024 fiscal year ended January 28 showed that the company achieved a revenue of $22.103 billion during the period, a year-on-year increase of 265%, far exceeding the expected $20.37 billion. After the financial report was released, many Wall Street analysts raised Nvidia's target price, with more than one institution raising it to four digits. Currently, Wall Street's highest target price for Nvidia is $1400, set by Rosenblatt Securities.
Undoubtedly, Nvidia is one of the biggest beneficiaries of the current global AI boom. Nvidia CEO Huang Renxun has also publicly stated on multiple occasions that he believes AI and computing power will make amazing progress in the coming years. A few days ago, Huang Renxun stated at the 2024 Stanford Institute for Economic Policy that AGI (General Artificial Intelligence) will arrive as soon as five years ago, and computing power will continue to improve, increasing by one million times in the next decade.
Nvidia's stock price has also experienced ups and downs. During an interview at Stanford Business School, Huang Renxun also shared how he emerged from the shadow of Nvidia's stock price plummeting by 80% during the US financial crisis: "If the core factors that led to your decision have not changed, you don't need to change, just keep moving forward."
Nvidia's recent surge in stock price has received strong market attention, but it has also raised concerns among some analysts. Among these voices, the most famous is Cathie Wood, the CEO of Ark Investment and a well-known investor.
In a letter to shareholders on the 7th, Wood issued a warning about Nvidia's future competitive pressure and compared it to Cisco, a US network solution provider that experienced a stock price "parabolic" from 1997 to 2000.
Wood wrote in the letter, "If there is no surge in software revenue and the justification for overconstruction (GPU), it is likely to see a stagnation in expenditure growth in this area... In the long run, unlike Cisco's historical trajectory, Nvidia may face a more severe competitive environment.". This is not only because AMD is gradually achieving market success, but more importantly, Nvidia's major customers, including cloud service providers and Tesla, are actively designing their own AI chips
It is worth noting that Mu Jie missed out on Nvidia's rise before. In the two months ending in January 2023, she sold up to 772884 shares of Nvidia's stock through the flagship fund ARK Innovation ETF. But since then, Wood has continued to sell at high prices, selling 3952 Nvidia shares worth $1.86 million at closing price in August last year, and stating that he believes the valuation of Nvidia shares has been reflected, and software companies will have more opportunities.
Other analysts also agree with Wood's viewpoint. Investment Bank D A. Davidson Senior Software Analyst Gil Luria said, "Nvidia's biggest challenge is that its customers want to compete with the company... The problem is not only that customers also want to get a share of Nvidia's accumulated profits, but they can't afford to continue spending so much money.". Microsoft's previous spending on Nvidia was less than 10% of the company's funds, but now it has increased to nearly 40%, which is unsustainable
In addition, analysts are also worried that the enthusiasm for AI will fade, and perhaps too much money has already been invested in manufacturing AI chips. For example, the traffic of chatbot ChatGPT has gradually decreased since May last year, and some investors have also started to slow down the speed of capital inflows.
Luria pointed out that every large-scale technology goes through an adoption cycle: "When technology begins to enter people's vision, there will be a strong stage of hype. At some point, hype becomes too big, and people will get through this stage and enter a valley of disappointment." Luria believes that perhaps AI will soon go through this process as well.
It is worth mentioning that with the soaring stock price of Nvidia, the latest batch of Nvidia insiders who have cashed out have also emerged. Recently, according to documents from the US Securities and Exchange Commission (SEC), two directors of Nvidia sold approximately $180 million worth of shares in the company. Among them, Tench Coxe, who has been a member of Nvidia's board of directors since 1993, sold 200000 Nvidia shares on March 5th at a price of $850.03 to $852.50 per share, cashing out approximately $170 million. Currently, Cox still holds over 3.7 million shares.