There’s no denying that Nvidia (NASDAQ:NVDA) is a leader and innovator in the field of artificial intelligence compatible processors. Yet, some stock traders are foolhardy enough to bet against Nvidia in 2024’s second half. That’s a risky bet as Nvidia stock is more likely to continue gaining value than crashing in the near future.
Meanwhile, some investors are desperate to find the “next” or “new” Nvidia. They’re getting distracted, as there’s a proven winner right in front of them. Instead of getting caught up in a quest for new shiny objects, feel free to join us as we conduct our due diligence on AI-hardware superstar Nvidia.
Nvidia and the Risk-On Case
Not long ago, S3 Partners Managing Director Ihor Dusaniwsky described Nvidia stock as “an overheated stock” that has “got to come back to Earth.” Without a doubt, some skeptics have been saying this for a year and a half, and have missed out on substantial share-price gains.
Mind you, not every commentator expects the Nvidia share price to “come back to Earth.” For example, BlackRock Investment Institute strategist Wei Li believes that a “case can still be made to be risk on.”
Li observed businesses are spending large amounts of capital on AI. More specifically, Li expects investments in AI data centers to increase 60% to 100% in the coming years.
She stated, “When we add up all this capex spend we get to numbers rarely seen in history comparable to the Industrial Revolution.”
Truist analyst William Stein also doesn’t seem overly worried about Nvidia stock coming “back to Earth.” Stein determined, “Industry contacts (component buyers & sellers) continue to reflect strong demand for [Nvidia’s] Blackwell” processors.
In a similar vein, KeyBanc analyst John Vinh (via TheStreet) expects AI demand to “continue to drive further gains over the back half the year and beyond.” This certainly sounds like a headwind for Nvidia and a problem for anyone betting against the company now.
A Self-Destructive Wager
While some forward-looking analysts envision continued Blackwell-driven growth for Nvidia, there are still critics and doubters. Some of them, believe it or not, are short-selling Nvidia shares.
Short-selling is effectively a wager that a stock will go down in price. If the stock goes up, the short-seller can lose all of his invested capital and even end up owing money to his broker.
According to Yahoo! Finance, Nvidia stock “has become one of the most heavily shorted stocks.” Why? Dusaniwsky proposed his “overheated stock” theory while also suggesting that some investors are short-selling Nvidia shares to hedge against the long positions in their portfolios.
Short-selling shares of a highly successful company with in-demand products is a terrible strategy. Again, you could lose all of your investable capital and then some.
Plus, there could be a snapback effect if Nvidia shares are heavily shorted. So, we definitely do not recommend betting against Nvidia in this way.
Nvidia Stock: Risk-On, but Not High-Risk
There are two main takeaways here. First, don’t waste too much time searching high and low for the “next” Nvidia. Second, wagering against Nvidia is extremely risky and not recommended.
The risk-on/bullish case for Nvidia remains strong due to high demand for AI-enabled processors. All in all, it’s too risky to short-sell Nvidia stock, and investors can choose to buy a moderate number of Nvidia shares with confidence.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
