Nvidia now worth 11.7% of U.S. GDP — will this be the new dotcom bubble?

Core Insights - The rise of artificial intelligence (AI) is significantly impacting financial markets, particularly benefiting semiconductor stocks like Nvidia (NVDA), which has seen a 190.14% increase in share price in 2024, with 75.77% of that gain occurring in the last six months [1] - Nvidia's market capitalization currently represents 11.7% of the U.S. GDP, surpassing Cisco's peak of 5.5% in 2000, raising concerns about potential market corrections [1][5] - Despite fears of an AI bubble, recent market reactions to earnings reports, such as ASML's disappointing results, may be overreactions, as evidenced by quick recoveries following positive news from TSMC [3][4] Market Dynamics - Nvidia's stock volatility is influenced by broader market sentiments and specific company news, with a recent 5% drop attributed to ASML's earnings report, although some analysts argue this reflects sector-specific issues rather than a broader AI market weakness [3][4] - The competitive landscape for Nvidia is intensifying, particularly with AMD's new chip releases, but growth is supported by expanding demand in sectors like self-driving vehicles and cloud computing [5] Valuation Concerns - High valuations in the market are a concern, with the Buffett Indicator reaching 197% in early October, indicating potential overvaluation compared to historical levels [7][10] - The current market valuation is higher than during the dotcom crash, but the revenue sources for leading companies are more diversified globally, making traditional GDP comparisons less reliable [10]