Nvidia succeeds Tesla as market flips from EV to AI

Nvidia's rise is captivating the stock market and driving the S&P 500 index to new highs.

But it also raises cautionary reminders of another investor darling that soared on dreams of a technological transformation, only to tumble back to earth when those hopes turned to disappointment.

That stock belongs to Tesla, which sparked its own mania in 2017 as investors bet that electric vehicles (EVS) were going to take over the world.

Back then, Mr Elon Musk's company was a phenomenon, as it blew past established carmakers like General Motors and Ford Motor in market capitalisation to become America's biggest auto manufacturer.

Some analysts were looking beyond the industry and calling it "the next Apple".

Now, Tesla shares are down more than 50 per cent from their 2021 peak, and other EV stocks that raced higher with it are shadows of their former selves.

All of which should be sobering for Nvidia investors, who see the stock as a limitless bet on an artificial intelligence (AI) future.

The company's shares have added 66 per cent in 2024 after more than tripling in 2023.

"We have seen time and again that when investors fall in love with the idea of the technology innovation du jour, logic takes a back seat", said Mr Adam Sarhan, founder and chief executive of 50 Park Investments.

"And when emotion takes over, sky is the limit."