In 2024, Nvidia (NASDAQ:NVDA)'s relentless march continues to propel the US equity market to new peaks. Jeremy James Siegel, a finance professor at the Wharton School, suggested that Nvidia stock has the potential to double or even triple from current levels should it mirror Cisco (NASDAQ:CSCO)'s trajectory during the dot-com era.
Nvidia stock price rally
It is no secret that Nvidia has been the single-biggest driver of the latest stock market rally.
As the AI boom took the world by storm in early 2023, NVDA, thanks to its high-end chips, started to attract unprecedented demand.
The reason for this is that generative AI services such as ChatGPT require high computational power, primarily delivered by specialized chips known as graphics processing units (GPUs). Nvidia dominates this market, holding an estimated 80% share, according to analysts.
GPUs excel in performing the particular mathematical operations required for AI workloads, offering superior efficiency in these tasks.
In comparison, the more versatile central processing units (CPUs) produced by firms such as Intel (NASDAQ:INTC) are capable of a wider array of computational duties but do so with lesser efficiency in specific AI-related processes.
Because of significant demand for its GPUs, Nvidia’s sales exploded, as highlighted in its recent earnings reports. This breakneck growth has been reflected in the chipmaker’s stock, which rocketed over 270% over the past year.
This year alone, Nvidia stock is up a whopping 82%, broadly outperforming the broader market.
What happened during the dot com bubble?
As a handful of AI-related technology giants continue to send the US stock market to new record highs, some investors are drawing parallels between this bull market and the one during the so-called “dot com bubble.”
The dot com bubble (late 1990s to early 2000) was a period of excessive speculation in internet-based companies, leading to skyrocketing stock prices.
Investors poured money into startups with no profitability, driven by the promise of the internet's potential. The bubble burst in 2000, causing massive losses.
Cisco, among others like Qualcomm (NASDAQ:QCOM) and Oracle (NYSE:ORCL), was among the companies that witnessed significant growth during this period.
The networking and cybersecurity service provider became one of the most valuable companies in the world by market capitalization, epitomizing the era's investment fervor in technology and internet-related stocks.
Nvidia stock forecast
Alongside Nvidia, gold and Bitcoin, have also been rising to new highs after a period of nearly four years of weakness. These are positioned as "momentum" assets in the current market, Professor Jeremy J. Siegel said in his weekly commentary released Monday.
While Nvidia faced a notable 10% intraday drop last Friday, such setbacks do not necessarily halt the momentum cycle, and further highs could be anticipated, Siegel said.
Still, the recent fluctuation in Nvidia's stock price raises questions about the broader tech sector's trajectory.
“Are we in a 1996-97-like hype cycle where these stocks are still going to get even crazier as we did 24 years ago during the internet mania? There’s no way to answer that question now,” Siegel said in the commentary.
“There could be 2-3x more upside in Nvidia if it follows Cisco’s valuation path to its peak. To be clear—this is not my prediction of what will happen—just to note as to what is possible in a mega bubble,” he wrote.
As Nvidia stock trades around $900, Siegel’s comments suggest the stock could hit as much as $2700, which would translate into a market cap of ~$6.8 trillion.
Earlier today, Bank of America (NYSE:BAC) lifted its price target on NVDA stock to $1100.