Wharton School finance professor, Jeremy James Siegel, has suggested that Nvidia (NASDAQ:NVDA) shares could double or even triple, mirroring the trajectory of Cisco (NASDAQ:CSCO) during the dot-com bubble, as Nvidia continues to drive the U.S. equity market to new heights.
What Happened: Nvidia's stock has been a significant force behind the latest stock market rally fueled by the AI boom. The company's high-end chips, essential for AI services like ChatGPT, have seen unprecedented demand, leading to explosive sales growth, reported Investing.com.
The company's graphics processing units (GPUs) dominate the market, holding an estimated 80% share. With superior efficiency in AI-specific tasks, Nvidia's GPUs outperform more versatile central processing units (CPUs) produced by firms like Intel (NASDAQ:INTC). Nvidia's stock skyrocketed over 270% over the past year, and this year alone, it's up 82%, broadly outperforming the market.
Nvidia's rise has drawn parallels to the dot com bubble of the late '90s to early 2000s, a period of excessive speculation in internet companies leading to rocketing stock prices. During this time, Cisco became one of the most valuable companies in the world by market capitalization, showcasing the period's investment fervor in tech and internet-related stocks.
Despite a recent 10% intraday drop, Siegel believes Nvidia's momentum is unphased and predicts further highs. His commentary suggests that if Nvidia follows Cisco's valuation path, its stock could reach as much as $2700, resulting in a market cap of $6.8 trillion.
"There could be 2-3x more upside in Nvidia if it follows Cisco's valuation path to its peak. To be clear—this is not my prediction of what will happen—just to note as to what is possible in a mega bubble," he wrote.
Why It Matters: Nvidia's stock has been on a remarkable run, with an 80% year-to-date surge, driven by the soaring demand for its AI-enabling graphic cards. Earlier today, Bank of America (BofA) reaffirmed its optimistic outlook on Nvidia despite its surging valuation, establishing a price target of $1,100 for the stock. In a note released on Wednesday, the bank upheld its "Buy" rating for Nvidia, emphasizing that even with a $2.2 trillion valuation, the stock remains reasonably priced.
However, Nvidia's rapid rise has also raised questions about the potential of its competitors. Advanced Micro Devices Inc (NASDAQ:AMD) has closely followed Nvidia's rapid rise, driven by the excitement surrounding AI.
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