- Nvidia stock price rally continued, pushing its market cap to over $1 trillion.
- This rally means that investors are embracing a risk-on sentiment.
- Therefore, we will likely see a renewed cryptocurrency rally.
Nvidia stock price relentless rally gained steam on Tuesday as the exuberance surrounding artificial intelligence continued. The stock surged by over 6%, pushing its total market cap to over $1 trillion. This rally triggered a surge in other AI stocks like C3.ai, Soundhound, and AITX shares. In this article, I will explain why this rally could spur a major move in cryptocurrencies like Bitcoin, Ethereum, Cardano, Ripple, and Linear Finance’s LINA.
Is Nvidia stock rally a bubble?
I strongly believe that Nvidia is one of the biggest stock bubbles on record. For one, you would expect a company valued at over $1 trillion to have billions of revenue and profits. Nvidia made over $26.97 billion in 2022, slightly higher than the previous $29.91 billion.
Nvidia is profitable but not one to justify a market cap of over $1 trillion. In 2022, the company’s net profit came in at just $4.3 billion. Its profit in the previous year was just $9.7 billion. This means that if a person bought Nvidia today, excluding its profitability growth, it would take over 217 years to break even. Of course, assuming that the company’s revenue and profitability will grow, the number of years will be much less. But still.
Therefore, I believe that Nvidia is the biggest bubble in the world. This is happening as investors bet in the future of AI and the demand for GPUs it will spur. While this is correct, I suspect that the impact of this demand will not be worth over $1 trillion.
It’s good for cryptocurrencies
While Nvidia is a bubble, it does not mean that the stock is about to crash. In fact, the stock could continue surging in the coming months as the irrational exuberance continues. In the past, we have seen companies like Apple, Microsoft, Google, and Amazon maintain their trillion-dollar market cap. Apple is closely approaching its $3 trillion market cap.
All these events are positive for cryptocurrencies because they imply that investors are slowly embracing a risk-on sentiment in the market. A risk-on sentiment is characterized by greed, as evidenced by the fear and greed index, which stands at the greed area of 66. It is also characterized by a low VIX index, which stands at $19.
Therefore, there is a likelihood that Bitcoin price will rebound in the coming weeks because of this view. If this happens, other cryptocurrencies like Linear Protocol (LINA), Cardano, and Ripple’s XRP will jump as well.
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