Why Nvidia Shares Are Not AI Bubbles
By TipRanks

Nvidia (NVDA) shares have undergone a sharp correction over the past few weeks. This is not due to a weak business in practice, but mainly due to a combination of macroeconomic concerns.

On the other hand, as Meta (META) and Alphabet (GOOGL) tested their own chips instead of Nvidia GPUs, concerns have been raised that the AI hardware market may no longer rely solely on Nvidia. In reality, the two architectures will coexist.

On the other hand, natural profit-taking after a surge in technology stocks, sector rotation that hit overvalued stocks and general concerns about an “AI bubble” weighed on Nvidia shares in the near term.

However, if you focus on the three key points and look at the big picture, Nvidia’s long-term investment logic remains structurally solid, and there is a clear microscopic difference from the dot-com bubble period. In other words, there is no real reason for structural panic, but the opposite is true.

We believe Nvidia’s compounding effects will ultimately win, and it’s a smarter strategy to build a long-term position by taking advantage of the bearish phase. As a result, we maintain a buy stance on Nvidia shares.

Nvidia takes control of all the dollars that go into AI

First of all, Nvidia has the highest ‘implicit return’ in the overall AI economy. Since it does not rely on a single model, app, or company, Nvidia’s product risk is low and only volume risk exists.

In the end, every dollar that every player invests in AI, from Microsoft (MSFT) to OpenAI to Grook, goes to Nvidia GPUs.

Thanks to its unrivaled moat, Nvidia has expanded its EPS by 2,220% and free cash flow by 1,930% over the past three years. Nvidia’s market cap growth rate over the same period was 792% below EPS and free cash flow growth, indicating that the valuation gains were not speculative.

Compared to the dot-com period, the situation is the opposite. At that time, sales were insignificant, profits were negative, and only valuation was expanded without fundamentals. Now, the supercycle of demand is real, cash generation is enormous, and above all, profits are in line with valuation.

Nvidia Evolves into a Full AI Stack

But Nvidia’s dominance goes far beyond being a primary destination for AI spending. As companies move toward strategic vertical integration of AI stacks, volume risks tend to decrease as they integrate hardware, software, and complete systems into a single product.

Creating true lock-ins in trendy AI is the CUDA (Programming Ecosystem), inference engines, Nvidia’s proprietary library, and the extensive toolchain that makes it easy to build an Nvidia base and nearly impossible to break away from.

When companies choose Nvidia, they choose the entire ecosystem rather than the chip. No company in the dot-com era has this level of dominance, depth of the moat, or non-replicable software advantage.

Even if the AI supercycle slows, Nvidia is still in a position to capture future digestions. Nvidia benefits twice even if cloud companies build capacity at extreme levels, and the risk of structural decline is lower in Nvidia than in hyperscalers. GPUs age significantly faster than fiber optics, which benefits from both initial deployment and replacement cycles.

Optical fiber in the dot-com era lasted about 20 years, but GPUs today last 5-6 years, according to some data. In other words, as soon as GPUs age, Nvidia can resell everything.

Nvidia is built to withstand any AI bubble

In the midst of the AI boom, it is possible for players to take excessive risks, build up too much debt, or rely on overly aggressive prospects. The same can be said of OpenAI, Oracle and other large companies.

But the key insight is simple: the boom is funded by others, and the upside is captured by Nvidia.

Nvidia doesn’t have to fully trust OpenAI’s business plan, bet on Oracle’s huge RPO, or accept the ambitious cycle of the latest hyperscaler. If everything succeeds, Nvidia wins. Even if it fails, Nvidia has already won.

Whether the final winner is Trinity/Antropic, OpenAI, Meta, or anyone else, Nvidia is still on top. And that’s why it makes Nvidia the most asymmetric way to play AI without having to guess who the final champion will be.

What Is Nvidia Buying, Holding, and Selling

Wall Street Securities’ optimism for Nvidia is virtually unanimous. Over the past 3 months, 39 out of 41 analyst opinions have been buying, with only 1 holding and 1 selling. The average price target is $257.72, which suggests an upside of about 43% compared to the recent stock price.

NVIDIA LONG-TERM HOLDING LOGIC

Connecting Nvidia to a bubble similar to the dot-com era may sound intuitive at first glance, but a closer look at microdynamics breaks down the comparison. Nvidia carries far fewer structural risks than companies building AI infrastructure, in addition to keeping pace with valuations and delivering performance and cash flow growth that exceeds that.

The real risk lies with companies that have huge capital expenditures and aggressive assumptions, not those that provide “computing” that drives everything.

Nvidia’s growth today is based on real demand, strong margins, and a software moat that is virtually untouchable, unlike the 2000 market that put a price on dreams of the distant future without operating base. And even if certain parts of the AI ecosystem bubble through overspending or overly optimistic forecasts, Nvidia is not at the center of the risk.

Nvidia isn’t a hole digger, it’s a shovel digger. Historically, companies in that position tend to be much more resilient through the cycle.

All of this reinforces a simple point: Nvidia’s fundamentals overwhelm short-term noise