When AI bots are less hopeful of the stock of their chipmaker Nvidia

Blistering rate of Nvidia’s gains has analysts wondering how sustainable the run is

- Jeff Sommer

It's not a household name quite yet, but anyone who follows the stock market knows at least a little about Nvidia.

The company is the wonder of the year, a stock by which all others are measured. Nvidia designs the chips that make artificial intelligence (AI) work, and because AI is being hailed as the most important technological development since the Internet, Nvidia shares have been rocketing since last year.

I'm not qualified to assess how important - or how dangerous - AI will one day become, but I do pay close attention to the stock market, which values Nvidia at more than US$2.2 trillion (S$2.94 trillion), making it the third-largest public company in the world behind Microsoft and Apple.

Enthusiasm for AI is raising the share prices of not only Nvidia, but also many other tech companies that are believed to be imbued with the technology's potential, including Microsoft, Meta and Alphabet as well as other chipmakers like AMD, Taiwan Semiconductor and Intel.

But the blistering rate of Nvidia's gains an increase of about 290 per cent over the past 12 months has me and many Wall Street analysts wondering how sustainable this run is. The answer has implications for the entire market.

There are many ways to examine this, including traditional stock analysis, which considers sales, earnings, cash flow, business growth and momentum.

I took an offbeat approach: asking several AI chatbots about Nvidia's prospects as a stock. Specifically, I asked how big Nvidia's market value would be in a decade if the company's share price kept its current pace.

What they told me amounted to this: Nvidia stock's sharp rise can't continue like this for very long.

And because much of the stock market is bound up in the same feverish Al-driven stock frenzy, the message is broadly true. If the market doesn't slow down soon, it may inflate itself into a bubble - and all bubbles eventually burst.