RE:Trees, Electric Walls and the Future Dowaan, recency bias can make you believe Nvidia is the future and will rule the world because of its exposure to ai. How can you argue against the stock market rally? I mean, these investors must know something that the rest of us don't know, right? Well, not so fast.
Here is a recent post I made about the comparison of Nvidia and Cisco.
Nvidia will suffer the same fate as Cisco did in the dotcom era. Their stock performance over a 10 year period is eerily similar with dips during the mid term year of the election (October 2022 vs October 1998). Cisco bottoms in October 1998 at around $10 and Nvidia bottoms on October 13 at $113.13 or about a 10 times difference in price. Over the next 17 months, Cisco rises to a peak share price of just over $80 while Nvidia is almost at $800! Just to give you an idea just how big of a bubble Cisco was in, it's market cap today, almost 24 years later, is $197 Billion compared to $560 billion on March 23,2000.
Cisco was the most valuable company in the S&P 500 during the dotcom era. Today, Nvidia is valued at around $2 trillion and it's only a matter of time before reality sets in and the stock price tumbles. One thing to know about bubbles is that it's difficult to time the turning point. In other words, Nvidia can go on to double over the next year before it eventually crashes hard. History teaches us that these rallies are not sustainable and it would be prudent to cash out and respect the lessons learned from the past.
https://www.morningstar.com/news/marketwatch/20240221594/wall-street-keeps-likening-nvidia-to-dot-com-era-cisco-is-the-comparison-justified