Is Nvidia Going to Plunge 40% (or More)? History Offers a Very Clear Answer.

Core Viewpoint - Hedge funds are increasingly betting against Nvidia, viewing its stock as overvalued amid a broader skepticism towards high-valuation tech stocks [1][2] Valuation Concerns - Nvidia has a market capitalization of $4.4 trillion and a price-to-sales ratio of 28, indicating an extremely high valuation that is unusual for such a large company [3] - Historical trends show that high-valuation stocks can experience significant declines, with examples from the dot-com bubble where major tech indexes lost over 80% of their value [4] Market Dynamics - Despite its strong position in the rapidly growing AI industry, Nvidia's stock could still be subject to short-term overvaluation, with past drops of 20% to 40% already occurring [6] - Analysts predict a potential 40% drop in Nvidia's stock, reflecting the volatility associated with high-growth stocks [7] Long-Term Perspective - The AI revolution is seen as a long-term opportunity, with Nvidia positioned as a key player due to its dominant market share in graphics processing units [5][9] - Historical examples, such as Amazon's stock performance post-dot-com bubble, illustrate that while high-growth stocks may face short-term declines, they can recover significantly over the long term [8]