Nvidia’s Rise Boosts Tech Stocks, but Some Are Cautious About Overvaluation

Tek shares have risen recently, helped among other things by the rise of Nvidia. But not everyone is sure of the way forward.

Over the past week, tech stocks have performed strongly on Wall Street, helped by the rise of computer chip maker Nvidia.

A week and a half ago, the company reported better earnings than expected in the first part of 2023. Not least, Nvidia predicted that its own sales would be 50 percent better than analysts on Wall Street had expected, due to demand for chips for artificial intelligence tools.

The cheerful expectations contributed to a real share rise both for Nvidia and other major computer chip manufacturers. The technology sector in general has also done well.

“In the Nvidia context, AI is going to create some winners and some losers … more losers than winners,” says Rajiv Jain, chief investment officer and founder of GQG Partners. Financial Times.

Nvidia’s share is up almost 30 percent since the quarterly report was released. Earlier this week, the market value of the company was over 1,000 billion at most, from which it has fallen back a little.

In the same period, the technology index Nasdaq is up around six percent.

“The most obvious winners at the moment, next to Nvidia, will be the bigger tech names, whether it’s Alphabet or Apple or other such names,” says Jain.

The investment director emphasizes that it is difficult to predict the winners, apart from a very few. On the losing side, he points out that some software and IT companies may become redundant and outcompeted.

Will be careful

Although tech and AI stocks have climbed on the stock market recently, there is concern among some investors that AI companies are now overvalued.

Edmond de Rothschild Asset Management, which has been inside Nvidia for a long time, has begun to scale back its bets on the stock, writes Bloomberg.

The manager’s preponderance in the stock is now significantly less than previously, investment director Benjamin Melman told the news agency.

– Should we add more to AI technology? We are less and less sure of that as the valuations are too high, he says.

– If the gains continue, we will be even more careful, continues Melman.

Increasing demand

American Nvidia makes computer chips that are used in PCs, cars and robots. The company is one of America’s largest when it comes to market value.

With the arrival of AI, they are important, among other things, because they are used for machines that operate chatbots. The rollout of ChatGPT contributed to a sharp increase in demand for Nvidia’s H100 chips.

Nvidia CEO Jensen Huang has stated that the company is experiencing increasing demand for its products.

Chief Investment Officer Michael Sansoterra at the investment company Silvant Capital Management said Wall Street Journal in connection with the rise for the Nvidia share that it is only now, after several months of a lot of AI talk, that the money is starting to flow in.

– This is going to be the biggest technological change we have seen since the internet, he told the newspaper.