AI Stocks Including Nvidia Face Bubble Risks, Warns 'Wizard of Wharton': 'Impossible To Tell When It Will End'

Jeremy Siegel, a renowned finance professor from the University of Pennsylvania’s Wharton School, has raised a red flag over the soaring valuations of technology stocks, particularly NVIDIA Corp (NASDAQ:NVDA).

What Happened: Siegel, also known as the “Wizard of Wharton,” cautioned that the current enthusiasm for tech stocks, including Nvidia, might be a sign of an impending bubble, reported Business Insider.

“The beginnings of a speculative bubble may be forming but it is impossible to tell when it will end,” Siegel said in his weekly WisdomTree commentary on Monday.

He noted that Nvidia’s stock has surged more than five times since the beginning of last year, propelling the company’s market value to $2 trillion, surpassing giants like Amazon and Alphabet. The demand for its graphics chips from AI companies has driven a 265% year-on-year revenue increase to over $22 billion in the last quarter.

Siegel, who had correctly predicted last year’s stock-market rally, suggested that the current tech-stock surge might eventually halt, leading to a potentially severe correction.

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Despite the mounting concerns about the U.S. economy, Siegel remains optimistic, citing low unemployment, strong job gains, and persistent inflation as positive indicators.

Why It Matters: Siegel’s warning comes amid a growing chorus of voices expressing concerns about a potential tech bubble. Just last week, J.P. Morgan strategists flagged similarities between the current market conditions and the dot-com bubble, raising concerns about extreme valuations.

Moreover, Apollo Global Management’s chief economist, Torsten Sløk, recently warned that the current AI bubble is even larger than the 1990s tech bubble, citing higher forward price-to-earnings ratios for the top 10 companies in the S&P 500.

However, not all experts share these concerns. Earlier this month, tech venture capitalist Gene Munster dismissed fears of an imminent AI bubble burst, asserting that we are at the beginning of a 3-5-year tech run.

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