– Then I got a real burn – E24

Nvidia has had a rollercoaster ride on Wall Street. When the AI ​​comet became the world’s largest company, its price was the highest since 2000, according to investment manager Robert Ness.

Næss compared valuations between the world's most valuable companies at different times.

And NvidiaNvidiaNvidia is often called the “darling of artificial intelligence.” Among other things, the company develops the computer chips needed to create artificial intelligence technology. This year, the stock price has risen more than 170 percent.a chip maker that surfs Artificial intelligence waveArtificial intelligence waveOptimism about artificial intelligence, abbreviated AI in English, has been highlighted as one of the reasons for the stock market rally on Wall Street this year and last., standing outside. According to Næss, Nvidia stock is priced at 44 times expected earnings this year, a valuation he says is “very high.”

When Nvidia held the top spot, the headline number was 50, and you have to go back a lot to find the last time that happened, according to the investment manager.

He says the last time the world's largest company was priced higher was in January 2000 when Microsoft was priced at 65 times expected earnings.

The stock market surge, driven by information technology stocks, which peaked in 2000, and the ensuing stock market crash, has since become known as Dot-com bubbleDot-com bubbleA period in the late 1990s when stocks associated with Internet companies (dot-com companies) had extremely high values, before falling dramatically..

We've seen this before, but if you had bought Microsoft in 1999 and held its stock for about a decade, you would have lost two-thirds of the money even though the company made a lot of money in that decade, Ness says. .

– I got a real bite because of the evaluation, he says.

roller coaster

Nvidia stock led the way in Wall Street's stock market rally, with a good helping of optimism about artificial intelligence — with the chip maker leading the way.

But the stock suffered a rare break before recovering. On Tuesday, Nvidia shares rose about seven percent after the stock fell a total of 13 percent over the previous three trading days.

The three-day decline took $430 billion off its market value, the largest three-day loss for any company ever, according to Bloomberg.

– I think it's that simple, he had a great return in the previous period, says Nice at Nordea.

Since the turn of the year alone, Nvidia shares have risen nearly 160 percent. For a short time, the company was also the most valuable in the world by market capitalization.

– It has risen a lot. “Maybe there were more people who were a little afraid of shadows,” Ness says.

Technology companies dominate

The vast majority of people believe that artificial intelligence is here to stay. This is also reflected in US stock exchanges.

The three biggest companies vying for the throne on the New York Stock Exchange are Nvidia, software company Microsoft, and electronics maker Apple. They are clearly in the lead, and Alphabet, which owns Google, is about $800 billion behind the third party.

Microsoft's market value is $3,300 billion, followed by Apple at about $3,200 billion. Behind these two products comes Nvidia, which has a market value of about $3,000 billion.

The common denominator is technology, and AI seems to be what everyone wants to produce or have a piece of. Major bank Goldman Sachs thinks so Generative artificial intelligenceGenerative artificial intelligenceGenerative AI is a technique within machine learning where the goal is to mimic data material. The most popular use cases are chatbots, such as ChatGPT. This will increase global GDP by 7% over the next ten years, and the McKinsey Global Institute expects that annual growth in GDP could increase by about 3 to 4 percentage points between 2024 and 2040.

Boarding

Of the three giants, Nvidia is the most exciting, according to chief strategist Erik Bruce at Nordea Wealth Management.

Nvidia went from being the 18th largest company on the S&P index to competing to become the largest company on Wall Street. He says: It is the most exciting company among the three companies.

So far this year, the broad S&P is still on Wall Street Up to about 15 percentand more than 26 percent last year.

The size and market value of Microsoft and Apple are not surprising, because they have grown over a long period of time and have significant market power in areas such as phones and software, according to Bruce.

Nvidia, led by Jensen Huang, produces advanced processors used to develop artificial intelligence models.

– They produce the “inner parts” of the AI, and all the other companies want it. Bruce says Nvidia can, so to speak, take whatever margin it wants because demand is so great.

Nvidia's rise was initially driven by increased profits. It's now a matter of the P/E multiple, or the stock price divided by the earnings per share, of 45, Bruce explains.

Overall, it's very high, which is typical of a stock where the market believes the company has a very promising future and strong earnings growth.

– The company has become expensive, but at the same time it is not expensive. Analysts have consistently underestimated earnings growth, and there are good chances of that happening in the future, says Bruce, stressing that there are good prospects for strong earnings ahead.

– Reliance on monopoly power

At the same time, the chief strategist wonders whether the violent development can continue forever.

– In the long run, I'm more worried. Profits are high due to high margins, and competition here will be stronger. In the long run, he says, the company's prices may be too high.

Meanwhile, Nvidia is the most obscure company of the Big Three on Wall Street.

– This is because they are completely dependent on the monopoly on AI, and other companies continue to demand AI as much, Bruce says.

The AI ​​wave is often called a race as it is about being the first to create models and products with artificial intelligence.

Both Microsoft and Apple have invested heavily in artificial intelligence. The latter got a boost recently when it launched an AI collaboration with Chatgpt for iPhone.

– On the other hand, which company has the greatest potential?

– It's hard to say, but again Nvidia may have potential if it maintains its market power and makes similar profits in the future. Meanwhile, the other two may also have potential, as we saw when Apple was filed last week, he says.

Bruce doesn't offer advice on individual stocks, but says he's interested in the computer chip maker.

– I'm still bullish on Nvidia because I think earnings will be good in the future as well, even though a lot has happened. That's still the case. Potential risePotential riseThe possibility of the value of shares increasing, rising, or their prices risingHe says.