Nvidia's Stock Deemed 'Frothy,' Analyst Predicts Impending Price Decline: 'Very, Very, Very Hard To Maintain'

One analyst has raised concerns about the sustainability of NVIDIA Corp‘s NVDA stock price, which has been on a meteoric rise due to the AI boom.

What Happened: Sarah Kunst, managing director at Cleo Capital, expressed her doubts about the sustainability of Nvidia’s stock price in a recent CNBC interview. Kunst pointed out that the stock’s price-to-earnings ratio of 97 is significantly higher than its trillion-dollar peers, indicating a potential bubble.

“I think the price that it’s at right now is very, very, very hard to maintain,” Kunst said.

Despite the stock’s logical rise due to the booming AI industry, Kunst believes that the current valuation is unsustainable. She attributed the stock’s surge to the influx of cash into the market, driven by optimism.

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While acknowledging the positive aspect of Nvidia’s rise in an overall bullish market, Kunst emphasized that the stock’s current valuation is not justified by its fundamentals.

“The reality is right now that things are up,” Kunst said. “There was so much cash sitting on the sidelines last year waiting for this big crashing downturn — that, knock on all of the wood, we have hopefully avoided. People want to put that cash back in.”

Why It Matters: Nvidia’s stock has been on a remarkable upward trajectory, largely due to the AI industry’s rapid growth. The company’s market capitalization recently surpassed that of Alphabet and Amazon, making it the world’s fourth most valuable company.

However, some experts, like Josh Brown of Ritholtz Wealth Management, believe that the market may have reached its peak for the year, with Nvidia’s stock being a prime example of the market’s excessive exuberance.

Meanwhile, influential investor Cathie Wood recently reduced Ark Invest’s stake in Nvidia amid the stock’s surge, indicating a cautious approach to the company’s future prospects.

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