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Is Nvidia a Bubble?

By Shlomo Maital

         2024: $1 tr.       Nvidia market cap.                    2025 $5 tr.

       Nvidia has become the first company whose market value of its shares reached $5 trillion.  $5 trillion!  That is larger than the national GDP’s of every country except the US, UK and Germany  (close tie with Germany!).

        Is this a bubble?

        Nvidia’s shares have risen by five times, from $1 trillion just over a year ago. The reason is clear. Nvidia’s Jensen Huang made a huge bet on AI chips…and thanks to his acquisition of Israeli startup Mellanox, founded by Eyal Waldman, his bet paid off. Nvidia has the chips that AI desperately needs… right at the moment when they were most needed.  Mellanox supplied software that speeds up calculations (originally, used to speed up uploads and downloads on the Internet),  which Huang cleverly realized could speed up calculations on microprocessors.

        So is it a bubble?  Probably.  Any share that rises by five times is a bubble.  Can Nvidia sustain its growth?  Especially when the US is trying to shut off the Chinese market for Nvidia, a market of the world’s second largest economy. 

        Every sharp rise in shares is driven by future expectations and dreams.  Nvidia’s 2025 profits rose to about $80 b., from around $28 billion in 2024.  That’s a big rise.  But a stock valuation of some 60 times net income is very high.  It is a PE price-earnings ratio of 60, astronomically high.

         US stock markets are now at all time highs.  It is not just Nvidia.  It is time to think carefully if you are in the market.  There are enormous storm clouds gathering.