Some investors bet against Nvidia, expecting AI bubble to burst
- Reference: 1717776186
- News link: https://www.theregister.co.uk/2024/06/07/some_investors_bet_against_nvidia/
- Source link:
Stock market short bets against Nvidia stand at about $34.4 billion, nearly twice as much as has been hedged against Apple, according to [1]Reuters , which quotes a report by financial analytics biz S3 Partners. It says at least a few investors are gambling that Nvidia's soaring share price will soon deflate.
The California-based chip company saw its valuation peak at about $3.012 trillion this week, putting it briefly ahead of Apple and [2]second only to Microsoft as the world's most valuable company.
[3]
Nvidia's shares have since fallen by about 2.6 percent, to prices that would translate to a $2.93 trillion market valuation. This is still impressive for a business that has seen its stock value increase by about 143 percent this year.
[4]
[5]
Some industry watchers believe that Nvidia will eventually overtake Microsoft as the company with the highest market cap in the world, amid [6]predictions that Nvidia will continue to steadily boost revenue in each of the four quarters in fiscal 2025 as more supplies of its premium-priced accelerators come online.
However, according to [7]MarketWatch , few companies can sustain above-average growth rates for more than a year or two, which would mean Nvidia is set to fall back before long.
[8]
This was mooted by The Register [9]last month , when Nvidia reported another record gain in revenue for Q1 of its fiscal 2025, which was up by a massive 262 percent year-on-year.
Those annual increases were compared to Nvidia's prior financial year, before the generative AI wave started to take effect, and analysts expect future growth rates to be much lower.
[10]China's new sanctions loophole: Use export-controlled chips inside the US
[11]Dominant AI players Nvidia, Microsoft, OpenAI face US antitrust inquiries
[12]Elon Musk confirms 12K H100s ordered for Tesla were instead prioritized for xAI
[13]HPE Q2 sales rise was brought to you by the letters A and I
As chip designer Arm [14]discovered recently , a company’s share price can take a hit once traders realize that their estimates of continued strong growth are not going to be met.
Additionally, there is also a sentiment from some corners of indsutry that we are in an AI bubble which will burst sooner or later, with [15]The Guardian newspaper recently claiming that "nothing grows exponentially forever. So, are we caught in an AI bubble? Is the pope a Catholic?"
Economic research biz Capital Economics has even put an approximate date on this, [16]predicting that the AI-fueled stock market bubble will burst in 2026, after first driving the S&P 500 to a high during 2025. ®
Get our [17]Tech Resources
[1] https://www.reuters.com/technology/short-bets-against-nvidia-stand-34-billion-s3-partners-says-2024-06-06/
[2] https://www.theregister.com/2024/06/06/nvidia_microsoft_and_openai_face/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZmODBXqCXA7nJD2VbyFOKAAAAIk&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZmODBXqCXA7nJD2VbyFOKAAAAIk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZmODBXqCXA7nJD2VbyFOKAAAAIk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.bankrate.com/investing/nvidia-stock-near-all-time-high
[7] https://www.marketwatch.com/story/nvidia-begs-the-question-how-long-can-a-growth-stock-grow-faster-than-the-market-f765fe27
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/systems&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZmODBXqCXA7nJD2VbyFOKAAAAIk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2024/05/23/nvidia_beats_market_expectations_again/
[10] https://www.theregister.com/2024/06/06/chinas_new_chip_sanctions_loophole/
[11] https://www.theregister.com/2024/06/06/nvidia_microsoft_and_openai_face/
[12] https://www.theregister.com/2024/06/05/elon_musk_confirms_h100_destined/
[13] https://www.theregister.com/2024/06/05/hpe_q2_2024/
[14] https://www.theregister.com/2024/05/09/arm_q4_2024/
[15] https://www.theguardian.com/commentisfree/2024/apr/13/from-boom-to-burst-the-ai-bubble-is-only-heading-in-one-direction
[16] https://markets.businessinsider.com/news/stocks/stock-market-bubble-crash-2026-artificial-intelligence-ai-interest-rates-2024-4
[17] https://whitepapers.theregister.com/
Re: wise bet.
Meta. Nvidia may be greedy, but that's kind of their job.
Short term or long term?
In the long term, this LLM/AI nonsense is definitely going down.
But I wouldn't bet against Nvidia in the short term, because people are stupid. It's going to have to cost them money before they realize just how useless it really is.
But hey, that may be a good thing, maybe it's distracting enough that it'll delay work on real AI that will then realize how awful we are and decide to purge the planet.
Re: Short term or long term?
Yes, in the long run LLMs are going the way of the Blockchain and the Metaverse. That's also why I think it's stupid to invest in companies such as OpenAI or Anthropic. They will never break even and will go under with hundreds of millions in losses.
The only companies that are doing well currently out of the LLM hype are Nvidia and Azure (selling the tools to the gold diggers). They will survive the hype as for them it's just extra income on top of an existing income stream. As long as their management is smart enough to not expect profit to grow for ever (contrary to many companies that boomed during the Covid lockdowns that stupidly thought they could expect profit to grow for ever and are now suffering the consequences), they will survive.
The big challenge is when to get out of the stock. Both monied morons and smart cookies are currently investing in companies such as Nvidia but only the morons won't get out on time. But when is it time to jump off the hype train? Late next year?
So they've never seen a hype train before?
Hype trains tend to last longer than people think they should.
It will run out of steam one day, just not any time soon.
Bitcoin, anyone? https://www.web3isgoinggreat.com/
Curse these accelerator-only cards
When the AI bubble bursts and the market is flooded with unsold boards and second-hand from stripped-out AI bitbarns, they are going to be those accelerator-only cards without any video outputs. So you'll be able to buy loads of GPU-style compute cheaply but without it being on an actual graphics card.
So no cheap(ish) upgrades to boost the old FPS for "Lemmings 2".
It's a bold strategy to short a stock running on hype. Market can stay irrational longer than you can stay solvent and all that...
wise bet.
Difficult to choose which group I'd like to see lose the most thought.