In 2024, Nvidia (NASDAQ: NVDA) continues its relentless upward trajectory, driving the US equity market to new heights. Jeremy James Siegel, a finance professor at the Wharton School, has suggested that Nvidia’s stock could potentially double or even triple from its current levels if it follows a similar trajectory to Cisco (NASDAQ: CSCO) during the dot-com era.
Nvidia stock price rally
It’s widely acknowledged that Nvidia has been the primary catalyst behind the recent surge in the stock market.
With the advent of the AI revolution in early 2023, Nvidia, leveraging its advanced chips, witnessed an unprecedented surge in demand.
This surge can be attributed to the fact that cutting-edge AI applications, like ChatGPT, necessitate high computational capabilities, which are primarily delivered through specialized chips called graphics processing units (GPUs). Nvidia holds a dominant position in this market, commanding an estimated 80% share, according to industry analysts.
GPUs excel in executing the specific mathematical operations required for AI workloads, offering superior efficiency in these tasks compared to the more versatile central processing units (CPUs) produced by companies like Intel (NASDAQ: INTC). While CPUs are capable of handling a broader range of computational tasks, they do so with less efficiency in AI-related processes. Due to the significant demand for its GPUs, Nvidia has experienced explosive sales growth, as evidenced by its recent earnings reports. This rapid expansion has been reflected in the remarkable surge of Nvidia’s stock, which has soared over 270% in the past year alone.
In the current year, Nvidia’s stock has surged an impressive 82%, significantly outperforming the broader market.
What happened during the dot com bubble?
As a select group of AI-focused technology behemoths continues to propel the US stock market to unprecedented highs, some investors are drawing comparisons between this current bull market and the infamous “dot com bubble” of the late 1990s and early 2000s.
The dot com bubble, which occurred during the late 1990s and early 2000s, was characterized by rampant speculation in internet-based companies, resulting in soaring stock prices. Investors eagerly funneled capital into startups, often without profitability, enticed by the vast potential of the internet. However, the bubble ultimately burst in 2000, leading to widespread losses and market turmoil.
During this period, companies such as Cisco, along with others like Qualcomm (NASDAQ: QCOM) and Oracle (NYSE: ORCL), experienced substantial growth.
Cisco, a provider of networking and cybersecurity services, emerged as one of the most valuable companies globally by market capitalization, symbolizing the exuberant investment sentiment surrounding technology and internet-related stocks at the time.
Nvidia stock forecast
Alongside Nvidia, gold, and Bitcoin, have also been experiencing a resurgence to new highs following a period of nearly four years of weakness. These assets are identified as “momentum” assets in the current market landscape, according to Professor Jeremy J. Siegel in his weekly commentary released Monday.
Despite Nvidia encountering a significant 10% intraday drop last Friday, such setbacks do not necessarily disrupt the momentum cycle, and further highs could be expected, Siegel remarked.
Nevertheless, the recent volatility in Nvidia’s stock price prompts inquiries about the broader trajectory of the tech sector.
“Are we witnessing a hype cycle reminiscent of 1996-97, where these stocks are poised to become even more frenzied as we experienced 24 years ago during the internet boom? There is no definitive answer to that question at present,” Siegel stated in the commentary.
“There could potentially be a two to three-fold increase in Nvidia’s value if it follows the valuation trajectory of Cisco to its peak. It is essential to clarify—this is not a prediction of what will transpire—rather an acknowledgment of what is feasible in a mega bubble,” he emphasized.
With Nvidia’s stock trading around $900, Siegel’s remarks suggest the stock could surge to as much as $2700, resulting in a market capitalization of approximately $6.8 trillion.
Earlier today, Bank of America raised its price target on NVDA stock to $1100.