Nvidia is currently riding high on the back of the generative AI wave, yet some believe the GPU champ will have a limited time in the sunlit uplands and are betting that its share price will soon fall.

Stock market short bets against Nvidia stand at about $34.4 billion, nearly twice as much as has been hedged against Apple, according to Reuters, which quotes a report by financial analytics biz S3 Partners. It says at least a few investors are gambling that Nvidia's soaring share price will soon deflate.

The California-based chip company saw its valuation peak at about $3.012 trillion this week, putting it briefly ahead of Apple and second only to Microsoft as the world's most valuable company.

Nvidia's shares have since fallen by about 2.6 percent, to prices that would translate to a $2.93 trillion market valuation. This is still impressive for a business that has seen its stock value increase by about 143 percent this year.

Some industry watchers believe that Nvidia will eventually overtake Microsoft as the company with the highest market cap in the world, amid predictions that Nvidia will continue to steadily boost revenue in each of the four quarters in fiscal 2025 as more supplies of its premium-priced accelerators come online.

However, according to MarketWatch, few companies can sustain above-average growth rates for more than a year or two, which would mean Nvidia is set to fall back before long.

This was mooted by The Register last month, when Nvidia reported another record gain in revenue for Q1 of its fiscal 2025, which was up by a massive 262 percent year-on-year.

Those annual increases were compared to Nvidia's prior financial year, before the generative AI wave started to take effect, and analysts expect future growth rates to be much lower.

As chip designer Arm discovered recently, a company’s share price can take a hit once traders realize that their estimates of continued strong growth are not going to be met.

Additionally, there is also a sentiment from some corners of indsutry that we are in an AI bubble which will burst sooner or later, with The Guardian newspaper recently claiming that "nothing grows exponentially forever. So, are we caught in an AI bubble? Is the pope a Catholic?"

Economic research biz Capital Economics has even put an approximate date on this, predicting that the AI-fueled stock market bubble will burst in 2026, after first driving the S&P 500 to a high during 2025. ®

https://www.theregister.com//2024/06/07/some_investors_bet_against_nvidia/