Nvidia reached a record intraday market capitalization of $5.78 trillion on Monday. Analyst Dan Ives of Yorkville Ives & Co suggests that current Wall Street estimates for the chipmaker are undervalued by 25% to 30%. According to Ives, demand for Nvidia chips currently exceeds supply by 13 to 14 times.
The company's influence is significant, as Nvidia leads a group of 10 stocks that account for approximately 39% of the S&P 500 index. Despite this, investor Michael Burry has taken a bearish position, holding put options on Nvidia that expire in September 2027, citing concerns over a potential AI market bubble.
Financial data from DBS Group indicates that Nvidia trades at 17 times forward earnings. In comparison, Cisco traded at 100 times forward earnings before its historical crash. Analysts are monitoring the broader economic impact, noting that South Korea saw a 26.4% year-on-year increase in nominal output in the second quarter, largely driven by chip exports.
Risks remain regarding the financing of Nvidia's customers. In August, the company announced preliminary agreements to provide approximately $500 billion in customer financing to six financial firms. There are concerns that a potential default by these customers could create a negative feedback loop for the chip manufacturer, similar to historical market failures.
