Artificial Intelligence (AI) Stock Nvidia May Be the Bubble of the Century, and History Suggests It Won’t End Well

Since this year began, the iconic Dow Jones Industrial Average, benchmark S&P 500, and growth-powered Nasdaq Composite have all put the 2022 bear market in the rearview mirror and catapulted to all-time closing highs. Although megacap stocks have done a lot of the heavy lifting, it’s Wall Street’s next-big-thing investment trend, artificial intelligence (AI), which is fueling this move.

When talking about AI, I’m referring to the software and systems being used in place of humans to carry out tasks. The secret sauce for AI is machine learning, which allows software and systems to learn over time and become more efficient at their tasks and/or learn new tasks.

The reason AI stocks have soared is simple: AI has application in almost every sector and industry. Though estimates vary wildly, the analysts at PwC believe artificial intelligence can add $15.7 trillion to global gross domestic product (GDP) by 2030.

Nvidia has ridden its competitive advantages in AI to historic gains

No company has benefited more from the AI revolution than Nvidia (NASDAQ: NVDA).

When the curtain opened on 2023, Nvidia boasted a $360 billion market cap that had primarily been driven higher over the years by its dominance in graphics processing units (GPUs) used in gaming and cryptocurrency mining. As of the closing bell on March 4, 2024, Nvidia’s market cap had swelled to $2.13 trillion. Only Apple and Microsoft stand in its way of becoming the largest publicly traded company.

Nvidia’s skyrocketing stock is a reflection of its dominance as the infrastructure backbone of high-compute data centers. Its A100 and H100 GPUs are expected to account for the lion’s share of GPUs deployed in enterprise-operated AI-accelerated data centers this year.

With demand absolutely overwhelming supply, Nvidia has enjoyed top-notch pricing power for its class-leading GPUs. Although production of its A100 and H100 GPUs is expected to increase this year as chip fabrication giant Taiwan…