Is Nvidia Stock a Buy or Sell as a Billionaire Pro Warns of an AI Bubble?

The Nvidia stock price has soared and is hovering near its all-time high as the theme of artificial intelligence (AI) continues to accelerate. While analysts are generally bullish on NVDA stock, some, including billionaire Orlando Bravo, are warning about an AI bubble that could affect companies in the industry.

Orlando Bravo Warns About AI Bubble

Nvidia has been the biggest winner in the artificial intelligence industry, where its GPUs hold the largest market share, as they are utilised by some of the top players in the sector, including OpenAI and Anthropic.

However, Orlando Bravo, the founder and managing partner of Thoma Bravo, a top player in the private equity industry, has warned that the AI industry is in a bubble.

In an interview with CNBC, Bravo, who has a net worth of over $12 billion, cited the valuations of companies in the industry and the fact that firms have not demonstrated how to grow the sector and justify the valuations.

Most importantly, he highlighted the circular investment situation in the AI sector, noting that most of the growth is coming from a handful of companies.

OpenAI, the parent company of ChatGPT, has become the most aggressive in this as it has announced deals worth over $1 trillion in the past few months. In a recent deal, Nvidia announced that it would invest $100 billion in OpenAI, which will then use its chips to build its data centres.

OpenAI has also reached a similar deal with AMD, in a transaction that will see it buy 100 million shares in the company.

At the same time, OpenAI has entered into a deal with Oracle, which will see the latter invest billions of dollars in Nvidia chips. Nvidia, on the other hand, has taken a $5 billion stake in Intel, another company that makes CPUs and GPUs.

Nvidia Client Concentration is Another Risk

Technology analysts have also noted that Nvidia’s revenue growth is being driven by just a handful of hyperscalers like Microsoft, Google, Nvidia, and Oracle.

Microsoft, which has a big stake in OpenAI, accounts for over 20% of its total revenue.  The top five hyperscalers in the US, including notable names such as Meta Platforms, Amazon, and Google, collectively account for over 50% of the country’s revenue.

Therefore, if the AI bubble bursts, there is a likelihood that these companies will slow down their spending, which will hit their revenue and profitability growth.

All this is happening at a time when Nvidia has largely been locked in China, the biggest market of semiconductors.

Earnings to Be a Catalyst for the NVDA Stock

The next important catalyst for Nvidia’s stock price is the upcoming corporate earnings, which are expected to be released in November.

These earnings are likely to show that the company’s business performed well in the last quarter, as demand for chips remained at an elevated level.

Data compiled by Yahoo Finance indicates that the average revenue estimate for the company is $54 billion, representing a 55% increase from the same period last year. They also expect the numbers to show that earnings per share (EPS) rose to $1.24 from the 81 cents it made last year.

Nvidia Stock Price Technical Analysis

The daily timeframe chart shows that the NVDA stock price peaked at $190 last week and then pulled back as investors remained concerned about the AI bubble.

On the positive side, the Nvidia share price has completed its retest of the key support at $184. A break-and-retest is one of the most common bullish continuation signs.

The stock remains above the 50-day and 100-day Exponential Moving Averages. Therefore, the most likely scenario is where it resumes the uptrend and tests the important resistance level at $200.

On the other hand, a move below the support at $175, the 50-day Exponential Moving Average (EMA), will invalidate the bullish forecast for Nvidia stock prices.