If AI loses steam, will Nvidia shares fall like Meta, Google and Tesla?

If predictions made by James Anderson, a former partner at investment giant Baillie Gifford come true, chipmaker Nvidia's market capitalization may touch $50 trillion. It will be more than the entire value of all the companies listed in the S&P 500 index, which is about $45.84 trillion. However, Anderson himself has estimated a 10%-15% probability of this outcome. The market capitalization of Nvidia has soared from $1.1 trillion to $3.1 trillion in the past year. The combined value of the market capitalization of Amazon, Google, Microsoft, and Apple, are worth $14.5 trillion. The revenue of AI-related firms is growing at about 60%, Anderson calculated that if this trend continues, the company would have a market capitalization of about $49 trillion.

Nvidia riding on AI optimism

Talking to the 'Financial Times', Anderson said that the potential scale of Nvidia in the most optimistic outcome is both way higher than it could lead to a market cap of double-digit trillions. He also added that it is not a prediction, but a possibility if artificial intelligence works for customers and Nvidia’s lead remains intact.

What path will Nvidia take?

After OpenAI’s ChatGPT revolutionized the way work is done on computers, the share prices of Nvidia soared and half a million people who had invested in the tech company became millionaires. However, it should also be clear that Nvidia does not have a clear path to success. The growth trajectory of the company depends on whether it emphasizes more on gaming, crypto, or AI.


Talking to CNBC, Aswath Damodaran, Professor of Finance at New York University’s Stern School of Business said that the chipmaker is riding high on AI optimism. Taking a cautious note, he said that Tesla experienced a similar rally in 2020. Its market cap soared, peaking at $1.2 trillion in 2021, only to plummet about 30% in 2024 so far. Meta and Google also soared, but they faced competition and lost their grip on the tech world.

FAQs

How has Nvidia's market capitalization soared in the last year?
The market capitalization of Nvidia has soared from $1.1 trillion to $3.1 trillion in the past year.

What is the combined market cap of Amazon, Google, Microsoft, and Apple?
The combined value of the market capitalization of Amazon, Google, Microsoft, and Apple, are worth $14.5 trillion.