The price of Nvidia shares is rising. Many technology companies rely on chips from the American company for artificial intelligence. picture alliance / ZUMAPRESS.com | Andre M. Chang
Nvidia stock could triple in value if it follows Cisco’s path during the dot-com bubble, according to Jeremy Siegel.
The chip maker could be worth more than $6 trillion and outpace Apple and Microsoft, the financial scientist said.
Given the race for the best technologies for artificial intelligence, Nvidia’s chips are in demand.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.
Nvidia could triple its market value and become the first company in the world worth over $6 trillion, more than €5.5 trillion. At least these prospects await the company if it develops similarly to the telecommunications company Cisco during the dot-com bubble, the Internet boom of the 1990s, according to financial scientist Jeremy Siegel.
The microchip manufacturer’s shares have risen by more than 500 percent since the beginning of 2023, including almost 90 percent in the past few weeks alone. They are now worth 2.1 trillion euros. This means it overtakes Amazon and Alphabet and is only relatively close behind Microsoft – 2.8 trillion euros – and Apple – 2.5 trillion euros.
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Is Nvidia benefiting from renewed tech hype like over twenty years ago?
“The big question for Nvidia and the tech industry in general is: Are we in a hype cycle like 1996-97 and are these stocks going even crazier than they were 24 years ago during the Internet mania?” Siegel wrote in his this week “Wisdomtree„-Blog.
The retired Wharton finance professor and author of “Investing for the Long Term” cited Cisco as an example. The networking giant’s shares rose 1,000-fold in the decade between its IPO and the dot-com peak in March 2000. The company briefly became the most valuable company in the world with a market capitalization of 545 billion euros.
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Nvidia is now worth as much as the entire Chinese stock market
“If Nvidia follows Cisco’s valuation path to its peak, there could be two to three times more upside,” Siegel said. “To be clear – this is not my prediction of what will happen, just an indication of what is possible in a mega bubble.”
Siegel’s comment suggests that if Nvidia is indeed the new Cisco, the company’s shares could rise to over 2,300 euros, which would mean a valuation of up to 5.9 trillion euros. With a market cap of that size, it would be worth roughly two Microsofts, 12 Teslas, or 42 Nikes.
Nvidia’s chips are in extremely high demand
Cathie Wood of the investment company Ark Invest also compared Nvidia to Cisco in a recent letter to investors. But the comparison is anything but flattering. After the Internet bubble burst, Cisco shares collapsed by around 90 percent and never came close to their dot-com highs.
“Now we definitely no longer have the level of speculation in the markets or in the technology industry that we had in 1999 to 2000,” said Siegel. Growth stocks would trade at 30 times forward earnings today. That’s half what it was in 2000 – and there are many more proven, profitable companies with reasonable valuations today than there were 25 years ago, he noted.
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Goldman Sachs: 6 reasons why Nvidia shares will rise by 21 percent
Nvidia shares have soared because demand for the graphics chips from artificial intelligence companies like Meta and Tesla is insatiable. The booming sales caused the company’s sales in the last quarter to rise by 265 percent to 20.2 billion euros compared to the previous year and increased operating profit by almost 1,000 percent to 12.4 billion euros. The chipmaker has also benefited from the general stock rally that has pushed the benchmark S&P 500 index to record highs this year.
Investors are betting that the Federal Reserve will cut interest rates this year, boosting corporate profits and increasing the appeal of stocks as yields on bonds and savings accounts fall.
Disclaimer: Stocks and other investments generally involve risk. A total loss of the capital invested cannot be ruled out. The articles, data and forecasts published are not a solicitation to buy or sell securities or rights. They also do not replace professional advice.
Read the original article Business Insider.